NA FERRO-ALLOYS CONF: Slowing Economic, Steel Production Growth to Weigh on Ferro-Alloys Prices

Ferro-alloys prices will continue to trade lower going into 2020 amid slowing economic and steel production growth, Fastmarkets analyst, Amy Bennett, told delegates at the North-American Ferro-alloys conference in Chicago last week.”Although ferro-alloy prices will almost certainly trend lower in 2020, given the weakening economic fundamentals, we do not expect to see prices retreat to 2015/2016 lows, assuming producers respond to declining demand with alloy production cuts as needed,” Bennett said.

On an annual basis in 2019, ferro-alloys prices have generally retreated from the highs of 2018.

“Ferro-vanadium prices halved, but remain elevated relative to the long-term annual average. Ferro-silicon and ferro-chrome prices have both plunged by about 30% year on year in 2019. Manganese alloy price declines of around 3-7% year on year were comparatively modest, thanks to elevated ore prices,” Bennett said.

Ferro-vanadium
Ferro-vanadium prices in the Chinese and European markets both hit all-time highs last year, partly because of an anticipated increase in demand from the implementation of new rebar manufacturing standards in China from November 1 last year.

But prices began to drop sharply late last year when market participants realized the enforcement of the revised rebar policy was not as stringent as had been expected and because steel mills had increased their use of ferro-niobium to reduce their consumption of more costly vanadium.

The benchmark ferro-vanadium price in Europe has fallen by almost 60% since the start of the year. Fastmarkets’ price assessment for ferro-vanadium was $26.75-28 per kg on Friday September 27, down from $70-72 per kg on January 2.

Similarly, in the US, the price is down by 66.3% from January 3 when it stood at $42-45 per lb with Fastmarkets’ latest price assessment at $13.75-15 per lb on September 26.

“Between steel mill production cuts and diversification in raw materials, ferro-vanadium demand is shrinking to a greater degree than any reduction in vanadium supply,” Bennett said.

Fastmarkets research team expects to see ferro-vanadium prices slide in the near term due to consumers holding off on purchasing, utilizing existing stocks and positioning themselves for the upcoming annual contract negotiation season.

“We expect volatility to remain a feature of the vanadium market, with prices trending lower in 2020, [although they should] remain above the long-term annual averages,” Bennett added.

Fastmarkets research forecasts US ferro-vanadium prices will average $23 per lb in 2019 and $17 per lb in 2020, while prices in Europe will trade at an average of $43 per kg in 2019 and $35 per kg in 2020.

Ferro-silicon
Ferro-silicon prices have been struggling globally over the past year, with supply outpacing demand, Bennett said, with declining demand particularly evident in Europe, where ferro-silicon prices are approaching 2015-2016 lows, Bennett told delegates.

European ferro-silicon prices are down 25.9% to €920-940 per tonne from €1,230-1,280 to start the year.

Meanwhile, US ferro-silicon prices fell 27.36% from a peak of $1.05-1.07 per lb in October 2018 to bottom out at $0.74-0.80 per lb on August 8 this year.

“The slowdown in the automotive sector is dampening demand for ferro-silicon, [which is] used in an array of products sourced by the auto industry, including tire cord and foundry parts,” Bennett said.

Fastmarkets research expects stable to lower pricing in the ferro-silicon market in the coming year, with a seasonal upturn in the fourth quarter and in the first quarter of 2020 due to elevated northern hemisphere power prices,” she said, adding that this, in turn, will lead to reduced ferro-silicon output, “but in the absence of a significant supply-side adjustment, prices will continue to trend lower next year.”

For 2020, Fastmarkets forecasts that European prices will average €968 per tonne and Chinese prices $1,173 per tonne, while the US market is expected to average $0.82 per lb.

Ferro-chrome
As in the ferro-silicon market, chrome prices have struggled as supply has outpaced demand during 2019, Bennett said.

Charge chrome contract prices had settled down by around 2% for the fourth quarter of 2019, or down $0.02 per lb to $1.02 per lb, she said. 

Turkish chrome ore prices are down 14.58% from April’s peak of $235-245 and UG2 prices have fallen 19.89% from April’s peak of $186 per tonne. Similarly, US high-carbon ferro-chrome prices are down 24.13% from their May peak, while European high-carbon ferro-chrome prices have fallen 27.78% from their April peak.

However, market dynamics suggest that prices are more likely to rise than fall in the coming months, thanks to much needed production cuts announced by ferro-chrome producers, Bennett said.

In South Africa, Glencore, Hernic and Mogale Alloys have all announced cuts, while Yildirim and Albchrome have also announced cutbacks, she said.

“Supply cutbacks and rising costs of production suggest higher prices in late 2019 and into early 2020, but gains will be limited by disappointing demand conditions from the stainless [steel] industry,” she added.

Bennett forecast 2020 ferro-chrome prices will average $0.87 per lb in Europe, $0.83 per lb in China and $0.99 per lb in the US.

Manganese alloys
Manganese ore and alloy prices have seen widespread declines in recent weeks amid softening global economic conditions and margin squeezing, Bennett told delegates.

“Ore prices are likely to trend lower in the coming months given the supply growth and lagging demand, and the expectation of manganese alloy plant closures [will] further dampen ore demand,” she said.

Amid this weak demand, a strong US dollar and aggressive contract negotiations, Fastmarkets’ research outlook for 2020 is for stable-to-lower pricing.

In 2020, European silico-manganese prices are expected to average €972 per tonne and Chinese prices $998 per tonne, while US prices will trade at an average of $0.61 per lb.

Ferro-molybdenum
“Last year we forecast stability in ferro-molybdenum prices for 2019, and were proven largely correct, with prices rangebound between $26-29 per kg in Europe and $12-14 per lb in the US,” Bennett said.

Going forward, the Fastmarkets research team expects prices to remain relatively flat on an annual basis next year, given the fairly balanced supply and demand environment.

“Any significant changes in oil prices and energy markets could shift the ferro-molybdenum price outlook for next year,” Bennett told delegates. “But with the swift downward correction to oil prices after the recent supply side shocks, indicates that declining demand for oil in the face of weakening global economic growth is making a sustained upturn in oil prices an increasingly distant prospect,” she said.

In Europe, ferro-molybdenum prices are expected to average $28 per kg in 2020, while the US market will average $13 per lb next year, according to Fastmarkets research.

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