INTL FERRO-ALLOYS CONF: Nine Takeaways From Budapest

After a busy few days of meetings and annual contract negotiations, here are nine key takeaways from Fastmarkets’ International Ferro-alloys Conference in Budapest, Hungary.Chrome producers’ struggles set to continue amid need to redefine supply-demand balance
Cuts to chrome production have begun to support ferro-chrome prices, but limited demand growth and macroeconomic headwinds likely stifle the potential for a meaningful price increase.

“As an industry we realized [the impact of the uncertain macroeconomic backdrop] too late. We cut production to try to keep the supply-demand balance, which is beginning to work – if you go to the spot market you don’t find much material available,” Yildirim Group president and chief executive officer Robert Yildirim said during the annual chrome panel.

But ultimately, the chrome industry needs to reconsider the supply-demand balance if prices are to sustain at more palatable levels.

“The game is called survivability. 2020 will be a waste for all of us because we will work to survive,” Yildirim said.

Nickel could be set for a ‘sloppy’ start in 2020
Nickel prices could fall to $14,000 or $13,000 per tonne in the next few months and into the first half of 2020, after recent higher prices encouraged a supply response, according to Mark Selby, chairman and CEO of Canada Nickel Co.

Five-year price highs of $18,475 per tonne on the London Metal Exchange in September encouraged a “huge inflow of scrap in September,” as well as an increase in ore production to take advantage of higher prices, Selby said during a panel of nickel market participants.

“Once that is consumed, we should be back up to the numbers we saw recently in the second half of 2020,” delegates heard.

Ferro-niobium more than just a story of competition for vanadium market share
Soaring vanadium prices this time a year ago meant greater consideration of comparatively cheaper ferro-niobium as a substitute for ferro-vanadium in some steel products.

But there is potential for the niobium market to grow, beyond its competition with vanadium, delegates heard during a roundtable.

“The part where we’re really talking about competition [with vanadium] is 15,000 tonnes: it’s a small part of the market,” Gustavo Macedo, managing director of niobium producer CBMM said.

There are other parts of the market where there is scope for niobium use to increase, such as in the battery sector where, in particular, CBMM has formed a partnership with Japanese conglomerate Toshiba to consider the use of niobium to improve the stability and reduce charging times for lithium-ion batteries.

Manganese ore price falls offer short-term relief for alloy producers
The drop in manganese ore prices of more than 40% this year will ease the tight margins for Europe’s silico-manganese producers, according to Kevin Fowkes, managing consultant at Alloy Consult.

Lower feedstock costs will ease margins for Europe’s alloy producers at a time that they have had to cut-back production. Despite this, there could still be further reductions to production.

The long-term outlook for alloy producers in Europe remains tough, however, especially for non-integrated alloy producers, according to Amy Bennett, principal consultant at Fastmarkets.

The alloy sector in Europe is expected to remain under pressure because of the weak steel market.

Ferro-vanadium discounts in Europe widen in 2020 on weak outlook
Suppliers are offering wider discounts for long-term ferro-vanadium contracts for 2020 compared with this year amid oversupply and uncertain steel demand outlook, delegates told Fastmarkets on the sidelines of the conference.

Negotiations for some 2020 ferro-vanadium contracts were settling at a discount of around 5-6% to the midpoint of Fastmarkets’ assessment, several sources told Fastmarkets in Budapest.

End users are pushing back and showing low interest in long-term contracts leading suppliers to commit more material to the spot market next year, market sources said.

Downtrend in manganese flake will continue amid excess supply

The downtrend in the manganese flake market will continue going into 2020 amid excess supply in the absence of any significant production cuts, delegates told Fastmarkets in Budapest.

The manganese 99.7% electrolytic manganese flake, in-whs Rotterdam price fell to $1,610-1,670 per tonne on November 8, down by 30.2% from $2,300-2,400 per tonne on November 9, 2018.

At the time of last year’s Fastmarkets International Ferro-alloys Conference (November 11-13, 2018), the price was supported by production curtailments due to maintenance at Ningxia Tianyuan, a Chinese producer that accounts for around 40% of global manganese flake production.

But with the steel sector battling against a slump in demand for most of the year and majority of flake demand coming from the steel sector, the outlook for manganese flake could continue to be under pressure until next year, market sources said.

Ongoing negative ferro-molybdenum-oxide spread unsettles contract negotiations
End users are pushing to set their ferro-molybdenum contracts linked to the alloy’s price as opposed to linking it to the oxide price as has been the case in the past, market sources said.

“Consumers are betting on negative oxide-alloy spread continuing into next year but producers are hesitant to do it,” a trader told Fastmarkets on the sidelines of the conference.

A negative spread has continued between ferro-molybdenum and molybdic oxide for most of the year negatively affecting conversion margins.

Ferro-niobium threat fading for vanadium market
Demand for vanadium products has been weakened this year by domestic mills’ growing preference for ferro-niobium due to its relative price stability and competitiveness against vanadium products.

Ferro-niobium deals are typically agreed on a multi-year, fixed-price basis, rather than being tagged to third-party spot price assessments that fluctuate according to market fundamentals.

China’s imports of ferro-niobium soared by 86.9% year on year to 26,550 tonnes in the first half of 2019, from 14,204 tonnes in the corresponding period of 2018.

But the substitution threat has been fading, delegates told Fastmarkets in Budapest, with shipments slowing down and China importing around 2,550 tonnes of ferro-niobium in August, down from about 2,937 tonnes in July, marking a drop for the fourth consecutive month, according to official but unconfirmed data seen by Fastmarkets.

The price of ferro-vanadium in China hit a record high of $130-140 per kg in October 2018 on expectations that demand would significantly increase due to China’s new rebar policy that encourage mills to utilize greater amounts of alloys to achieve the revised tensile strength requirements.

Market participants told Fastmarkets that they expect China to import around 50,000 tonnes of ferro-niobium in the whole of 2019.

Global steel sector should improve from present low in 2020

The automotive slump in the European Union and China has been terrible for the steel and alloy demand and prices in 2019, according to Fastmarkets’ Bennett.

But the US market looks like it has bottomed out and could see some improvement in 2020. US crude steel output will rise 1-2% next year, and the European market will rise by 1-1.5% from the three year low estimated for 2019, according to Fastmarkets’ forecasts.

As Chinese growth of steel-intensive industrial production falls to around 4% (construction, autos, etc), steel demand growth will fall to a similar speed. The strong, albeit slowing, demand from nearly 8% this year, will remove another 10 million tonnes of steel exports from the international market, Bennett said.