TELF AG 2023 Market Roundup 2023 Week 18
Macro
Oil prices surged on Mon, posting the biggest daily rise in nearly a year, after a surprise announcement by OPEC+ to cut more production jolted markets. Brent crude was trading at $85 as of Friday, April 7, after touching the highest in a month at $86.44 earlier in the session. US West Texas Intermediate crude was at $79.84 a barrel, up $4.17, or 5.5%, after earlier hitting the highest level since late Jan. Saudi Arabia and other OPEC+ oil producers on Sunday announced further oil output cuts of around 1.16 million barrels per day, in a surprise move that analysts said would cause an immediate rise in prices and the USA called inadvisable. According to Reuters calculations, the pledges bring the total volume of cuts by OPEC+ to 3.66 million bpd, equal to 3.7% of global demand. In addition, Russia’s largest oil producer Rosneft and India’s top refiner Indian Oil Corp agreed to use the Asia-focused Dubai oil price benchmark in their latest deal to deliver Russian oil to India, three sources familiar with the deal said.
• The decision by the two state-controlled companies to abandon the Europe-dominated Brent benchmark is part of a shift in Russia’s oil sales towards Asia after Europe shunned Russian oil following the military operation in Ukraine more than a year ago. On the demand side, investors remain optimistic about China’s recovery, with PetroChina and Cnooc Ltd. saying a rebounding domestic economy can help cushion the impact of slower global growth.
• Baltic Index Edges Down. Last week decreased by 0.3% to 1,403 on weak demand for smaller vessels. The supramax index fell 3.7% to 1,237, the most significant daily percentage decline since January 13. On the other hand, demand for larger vessels continued to increase. The Capesize index, which typically transports 150,000-tonne cargoes carrying commodities such as iron ore and coal, rose 0.8% to 1,676; and the Panamax index, which usually carries coal or grain cargoes of about 60,000 to 70,000 tonnes, advanced 1.7% to an over 1-week high of 1,625. Looking ahead, some analysts pointed to the Japanese steel sector as one of the main drivers for the Capesize and Panamax segments in the coming quarters.
China outlook. China’s new home sales rose sharply in Mar, as a slew of support policies boosted a pickup in demand across the board in 14 surveyed cities, a private survey showed on Mon. The sales of new homes rose 55.7% m-o-m, up from growth of 31.9% in Feb, according to data from the
• China Index Academy — one of the country’s most prominent independent real estate researchers.Tier-1 cities — including the nation’s capital Beijing and the commercial hub of Shanghai — rose the fastest, jumping 73% last month. Sales in tier-2 cities and tier-3 cities grew 54.7% and 28.6%, respectively. This was supported by a bailout package introduced in late 2022, as well as incentives by local governments and the lifting of Covid-19 measures.
• China’s vast manufacturing sector, accounting for a third of the world’s second-largest economy by value, lost momentum in Mar amid still-weak export orders, slowing the country’s economic recovery from restrictive Covid-19 policies. China’s economy showed signs of a recovery in Jan-Feb, led by a pickup in services after the end of 3 years of strict Covid policies that had disrupted commerce and muzzled domestic demand. But a convincing manufacturing rebound has been lacking, dragging on the economy’s near-term outlook.
• Europe outlook. Inflation in the eurozone dropped by the most on record in Mar, but “core” price growth accelerated, which is likely to strengthen the case for more interest rate hikes by the ECB. Consumer prices in the eurozone rose by 6.9% in March after an 8.5% increase in Feb, implying the most significant drop since Eurostat started collecting data in 1991. But the fall was almost exclusively due to lower energy prices than Mar last year when they had surged in the wake of Russia’s invasion of Ukraine. As a result, a measure that excludes energy and food prices, known by economists as core inflation and seen as a better gauge of the underlying trend, accelerated to a new all-time high of 7.5% from 7.4% in Feb.
Ferro-alloys
• The European HC FeCr higher-grade price was down slightly, with deals concluded within the existing range. Fastmarkets’ weekly price assessment for FeCr HC 6-8.5% C, basis 65-70% Cr, max 1.5% Si, delivered Europe, was down 8 cents/lb at the bottom of the range to $2.41-2.90/lb. The lower-grade price dropped, possibly pulled down by the expectation of a decrease in tender prices from China. Fastmarkets’ weekly price assessment for FeCr HC 6-8.5% C, basis 60-64.9% Cr, max 3% Si, cif Europe, was down 5-10 cents/lb to $1.05-1.20/lb.
• The US HC FeCr price was down: Fastmarkets’ weekly price assessment for FeCr HC 6-8% C, basis 60-65% Cr, max 1.5% Si, spot, was down 5-10 cents/lb to $2.90-3.10/lb.
• The Chinese HC FeCr domestic spot price slowed down on limited trading and dropped tender prices. Tsingshan dropped its tender price for Apr-delivery HC FeCr, by RMB 600/t to RMB 8 795/t; TISCO is expected to show the same dynamics. Fastmarkets’ weekly price assessment for China FeCr HC 6-8% C, basis 50% Cr, spot price, was down RMB 100/t to RMB 8 850-9 150/t. Import prices for FeCr were stable, with international suppliers waiting for the tender prices to be published.
• Zimbabwe capacity additions. An official has said that Zimbabwe producer Zimalloys has announced it is ready to restart its furnaces this year after investing more than US$13 million in it. The company, controlled by the diversified mining group Kuvimba Mining House (KMH), has three furnaces at its Gweru smelting complex with a combined installed capacity of 120 Kt/y. ZimAlloys managing director Deric Dube told journalists during a media tour of Trojan Nickel Mine in Bindura on Tue that the plant would begin producing FeCr in August this year. They have had no furnace production for the last 13 years. Zimalloys now has the biggest furnace in the country, considering it’s a 30 megavolt amperes (MVA) furnace, compared to Zimasco (24MVA), producing ~2.8kt to 3kt/month.
• India capacity additions. Petro Carbon & Chemicals, an Atha Group company, plans to set up a ferroalloys manufacturing plant at Bardhanyaghata in the Midnapore district of West Bengal. The proposed plant will spread over 10.29 acres of land parcel and install a 4×9 MVA submerged arc furnace and 2×10 tph Cr ore briquetting plant to produce ferroalloys. The project will generate employment for around 300 people. Per the latest information shared with Projects Today, the company is awaiting environmental clearance (EC). The contractor and machinery suppliers are still being finalized. The company expects to commence the work on the project by Q3/2023.
• Woodmac has released its outlook for Q12023, under which ferrochrome consumption between 2023 and 2027 is forecast to grow at a CAGR of 4%, underpinned by robust growth in stainless steel. Beyond 2027, growth in primary consumption from Chinese stainless steel will moderate partly due to a rising scrap ratio. This will slow growth to a CAGR of less than 1% over the rest of the outlook. This slower growth will also be partly underpinned by a more subdued outlook for consumption in other alloy steels. By 2033, global ferrochrome consumption will breach 20 Mt, with 86% of this being accounted for by stainless steel and the rest by other alloy steels.
• The world stainless association has released figures for the entire year of 2022 showing that stainless steel melt shop production decreased by 5.2% year–on–year to 55.3 million metric tons. The most significant y-o-y decreases came from the US and the EU, with 15% and 12% respectively. China contracted by 2% and other Asian producers – by 5%. We expect a certain production rebound in 2023 as energy prices normalize and China shows signs of demand recovery after opening up after COVID restrictions.
• Over the long-term global stainless steel output will fare much better, with a meaningful upside expected. Much of this growth will continue to be underpinned by China. Indeed, the country’s output-restrictive steel industry reforms target carbon steels rather than value-added products such as stainless and specialty steels. We expect global stainless steel output to enjoy 8% year-on-year growth in 2023 to reach 61 Mt as growth benefits from the “reopening” of China. Over the longer term, global stainless steel production growth would average just above 2% between 2023 and 2050. This rate provides growth potential for chromium and silicon alloys, even though austenitic scrap ratios are forecast to rise. The growth potential is more significant for ferrochrome than ferrosilicon, which has lower exposure to stainless.
Base Metals
• In an updated five-year operating outlook, Canada’s Ero Copper projects an increase of around 125% to peak copper output of 100,000 t to 110,000 t in 2025, compared with 2022, from mines in Brazil. The new numbers are also higher than the previous 2025 production prediction of 92,000 t to 102,000 t. The latest output forecast for 2027 is 75,000 t to 85,000 t. The increases are primarily driven by expected higher grades at Tucuma, Para State, and the Caraiba operations in Bahia. CEO David Strang said: “Furthermore, by increasing mining rates and optimizing Tucuma’s stockpile strategy in 2025 and 2026, our outlook reflects an additional improvement in processed copper grades over the same period, with production expected to peak at over 55,000 t.” Ero’s planned mine development includes commissioning Caraiba’s mill expansion to 4.2 Mt/y from 3.0 Mt/y in Q4 2023, production starting at Tucuma in H2 2024, and sinking a new external shaft early in 2027 to enable a two-mine system at Caraiba’s underground Pilar mine.
• Glencore’s rejected proposal to merge with Teck Resources and demerge the coal businesses of the two companies is characteristic of the broader trends currently defining the mining industry. Companies and countries are pivoting their strategic focus to future-facing metals and deleveraging exposure to sectors that run against the global decarbonization agenda despite being profitable. The announced deal between Glencore and Teck could signal a new wave of mega deals in the metals and mining industry, a concept that fell out of favor after many unsuccessful transactions during the last boom. Allowing boardrooms to pursue acquisitive growth strategies could unlock synergies and expedite a transition to regionally centered supply chains, particularly for deals based on geographical proximity. And while a more competitive M&A landscape will drive asset metal prices up, it could also be the much-needed spur for developing projects critical to the green energy transition.
• Vladimir Potanin, the owner of Russian nickel-copper producer Norilsk Nickel (Nornickel), says he is deeply convinced the company will have the strength to again sell in the EU markets at previous volumes “after this period of instability has passed.” That refers to Nornickel’s European sales falling following Russia’s invasion of Ukraine in February 2022. When the conflict is over, “our partners would be wise enough to treat this pragmatically and for our mutual benefit,” he said in the Russian media. “We live in a strange world. Europeans and other consumers are very interested in our metal: it is high quality and logistically accessible, but due to known circumstances, some companies decide not to buy it due to an emotional assessment of the current situation. “Some even do themselves harm by refusing to honor existing contracts, while others refuse traditional volumes, replacing them with less profitable ones.” He also said: “We will fight to maintain our position in these markets in the EU. We will not be capricious and behave like children fighting in a sandbox. But everything that our traditional partners will not take, we will deliver to the markets of Southeast Asia and other countries, using logistics chains which are already in place.” That includes selling products via the port of Tangier, Morocco. “We will not face a situation where, due to the European partners’ refusal from our supplies, we will not have a market,” Potanin added. At the end of 2022, Europe accounted for 47% of Nornickel’s sales against 53% a year earlier, Asia 31% (up from 27%), the Americas 15% (no change), and Russia and the CIS 5% (no change)
• As CRU reports, world copper mine supply grew by 3.5% in 2022 despite the high level of disruption in South America, thanks to ramp up of output at the world’s largest mines such as Kamoa-Kakula, Grasberg, Qulong, Batu Hijau, Aktogay, Quellaveco, and Sicomines. The ramp-up of projects will continue to support mine supply growth in 2023, with Quellaveco and Quebrada Blanca Sulphides (QB2) expected to add more than 360,000 t compared to the 2022 output between them. However, the blockades affecting mines along the Southern Mining Corridor in Peru, the delay of key projects in Chile, and the temporary closure of Cobre Panama, have contributed to a slower growth rate, forecast to reach 2.6%.
• Ni Ore Inventories at Chinese Ports Dip 295,000 wmt WoW. As of March 31, the Ni ore inventories at Chinese ports dropped 295,000 wmt from a week earlier to 6.11 million wmt. The total Ni content stood at 48,000 mt. The port inventory across seven major Chinese ports stood at 2.89 million wmt, 95,000 wmt lower than last week. Ni ore prices trended lower this week. The weekly fall of NPI prices was over 60 yuan/mtu. The Ni ore buyers held a wait-and-see attitude since the NPI price trend was unclear, resulting in a sluggish Ni ore market. NPI plants were reluctant to purchase Ni ore due to the dropping NPI prices, while the port arrivals were low as the rainy season in the Philippines did not end; thus, the port inventory will keep falling
Battery materials
• Although demand and supply fundamentals showed no shifts this week, the sustained weak sentiment in aggregate demand continued to lower both cobalt metal and sulfate prices. As per CRU, reported metal prices are around RMB258,000 /t and commented that a lack of buying interest remains. Jinchuan metal prices have also lowered to reflect buyers’ expectations. For cobalt sulfate, offers also decreased to reflect the lack of demand from the auto market. A refiner and seller told CRU that their offers had been reduced to RMB39,000 /t and that deals were heard at RMB38,000 /t yesterday. “EV orders remain too weak to support cobalt sulfate prices, ” said the refiner.
Tsingshan, a name synonymous with the nickel and stainless market, has turned its attention to increasing its presence in the battery sector. The company has been transformative for the nickel industry and could play a similar role in the battery sector. The company reportedly plans to undertake an IPO of its battery subsidiary REPT Battero Energy in Hong Kong this year. The company has invested heavily in new capacities in Indonesia over the last few years, mainly nickel pig iron (NPI). Along with new capacity from other Chinese players, notably Virtue Dragon, Indonesian NPI rose to a staggering 1.1 Mt in 2022, almost double the level two years ago. Including China, global NPI stood at around half of total nickel supply last year. This growth in class 2 material has outpaced demand from the stainless sector leading to significant discounts for NPI/Ferronickel, a situation we see persisting. These large discounts and strong demand for nickel sulfate (used in EV batteries) have incentivized a move towards converting NPI lines to produce nickel matte, with Tsingshan taking the lead. The company also has interests in current and future HPAL projects.
• There are currently three HPAL projects operating in Indonesia, with a fourth – Huafei – expected to come on stream in 2023 H2. Indonesian HPAL projects produce a mixed hydroxide precipitate (MHP) containing nickel and cobalt. The MHP can be used to produce nickel sulfate or class 1 material. During 2022, MHP output in Indonesia rose to 98 kt, up from only 13 kt in the previous year. MHP output, as per CRU, is forecast to rise over the next few years as more HPAL capacity is commissioned. Nonetheless, even with more HPAL capacity, there is still a need for NPI matte to meet nickel sulfate demand growth from the EV sector.
• Chinese battery giant CATL plans to begin mass production and delivery this year of M3P batteries employing a new materials technology that will perform better and cost less than electric vehicle (EV) batteries based on nickel and cobalt, according to company chairman Zeng Yuqun. The new type has greater energy density and performs better than lithium-ion phosphate versions, Reuters news agency reported him telling an online investor briefing. CATL claims the M3P technology, combined with the company’s next generation of battery-pack technology, will enable an EV to run 700 km (440 miles) per charge. According to industry reports, M3P batteries combine magnesium, zinc, aluminum, and other metals to replace iron and form a new phosphate-based ternary chemistry.
