TELF AG 2023 Market Roundup 2023 Week 22
Macro
• Oil. Brent Heads for Weekly Decline. Brent crude futures steadied near $74 per barrel on Friday but were still set to lose more than 3% this week as demand concerns and an uncertain outlook for OPEC+ production policy weighed on the market. OPEC+ is set to meet over the weekend to decide on output policy, where investors remain split on whether the group would cut production further following mixed signals from key officials. Saudi Arabia’s energy minister recently warned speculators to “watch out.” At the same time, Russian Deputy Prime Minister Alexander Novak stated that he anticipated no new measures from OPEC+ as the group just implemented production cuts last month. A pessimistic economic outlook in China also continued to weigh on commodity prices after the world’s second-largest oil consumer posted mixed PMI figures for May. EIA data showed the US crude inventories jumped by 4.5 million barrels last week, defying forecasts for a 1.4-million-barrel decline.
• Gas. Natural gas futures in Europe extended losses to below €24 per megawatt hour to kick off June, a fresh two-year low, following a 30% drop in May. Abundant LNG supplies, reduced consumption, mild weather conditions, stronger renewable power generation, and subdued demand from Asia have been helping to push prices down. Furthermore, the European economy is displaying signs of weakness, with Germany experiencing a recession in Q1 2023, while recent indicators for China also point to a subdued recovery. Meanwhile, Norway’s Equinor has halted a gas leak at its Hammerfest LNG plant, and normalization is underway. Despite the current downward pressure, there is a possibility that abnormal heatwaves in Europe and Asia or drought conditions during the summer could lead to an increase in prices.
• Freight. Baltic Exchange Dry Index Continues to Fall. BDI fell for the 14th consecutive session on Thursday, down about 4.1% to an over three-month low of 937 points, amid subdued demand and low activity in the Atlantic basin. “Weaker demand for imported coal in Europe, improved supply, and a seasonal lull in some of the coal trades into China are the factors pressuring the overall index,” said Alexis Ellender, dry bulks analyst at Kpler. The capesize index, which tracks vessels typically transporting 150,000-MT cargoes such as iron ore and coal, slumped 6% to its lowest since March 2 at 1,144 points. The Panamax index, which tracks ships that usually carry coal or grain cargoes of about 60,000 to 70,000 MTs, posted its 26th consecutive daily drop, falling 1.4% to its lowest since February 22 at 1,030 points. Among smaller vessels, the supramax index lost 34 points, or about 3.9%, to its lowest since late February at 847 points.
Ferro-alloys
• Chrome ore. UG2/MG prices remained stable in May 30, with some Chinese buyers reportedly holding back from the spot market after major STS mill Tsingshan raised its latest monthly tender price by 200 yuan ($28) per MT. Some smelters were reportedly satisfied with the increase, while others have said the rise was not enough to offset high costs. The supply side reports logistical challenges as a key source of price support for Cr ore, although some suggested the market may now be in a holding pattern because buyers are reluctant to pick up Cr ore and sellers have not decreased offers. Meanwhile, sources said that electricity costs in Ningxia, Guizhou, and Guangxi provinces could come down from June, which could potentially reduce production costs for smelters in these regions, even as ore costs remain elevated.
• Port inventories of Cr ore continued to climb in China. However, most new arrivals reportedly were unavailable for sale, meaning there was no major increase in availability in the spot market. Chinese domestic FeCr spot prices remained unchanged in the week to May 30, with the high availability of the product linked in part to rising import levels. But some sources suggested this was still insufficient to make up for shortfalls created by smelter closures on the ground in China.
• FeCr. In Europe, higher grade (65-70% Cr content) high carbon FeCr prices registered further declines during the week to May 30, with sources on both the buy and sell sides reporting overall weakness in the spot market. Spot demand from the STS market has reportedly dwindled in recent weeks, with sellers saying they have reduced offer levels to maintain liquidity. Prices have moved closer to levels last seen before before Q1 of 2022, with levels now below $2 per lb Cr for the first time since February 2022. Economic uncertainty was cited among the reasons for the price decline, leading to a stronger focus on costs among end users. Meanwhile, prices for the lower grade (60-64.9% Cr content) material remained stable during the week, with one seller suggesting buyers in Europe may now be more willing to accept this material in light of potential cost savings.
In the US, the high-carbon FeCr market declined during the week ended May 25, as weak spot demand continues to weigh down pricing. Although suppliers noted that steel mill contract off-take improved over May, most mills have not need to dip into the spot market for extra material. Market participants suspect the spot market will remain limited over the near term, and prices may continue to tumble.
The imported charge Cr prices remained unchanged in China amid limited spot activity. However, some suppliers were reportedly concerned about the depreciation of the yuan against the US dollar, which may have dampened buying activity, pushing costs up in yuan terms while dollar prices remained stable.
• SiMn. Most BFA price indicators were negative again this month as the prices of most commodities fell in most markets. With steel production down, ferroalloy requirements are lower too. Spot markets in Europe and the US have been quiet, with contracts covering most steel plants’ buying needs. Alloy production is higher than in Q1, and there are reports that the Nikopol ferroalloys plant in Ukraine is operating again. Even activity in the growing Indian market is subdued, with stocks of finished steel high, just as the monsoon season is approaching, bringing seasonally lower demand. After strong production levels in China in Q1, partly supported by direct and indirect exports, steel production has slowed, although rebar output has not been that strong all year. This is contributing to weaker silicomanganese demand. Ore stocks remain high, and Gabonese supply is flowing into China again after the earlier disruption.
• Prices have continued to correct downward, lowering ferroalloy producers’ costs and price support. The most recent PMI data and floor space start figures are raising market participants’ concerns about underlying steel demand and production for the coming months, in addition to a seasonally quiet period here. It could be a long quiet summer in Ferroalloys markets. Si and Mn ferroalloys continue to edge lower in May on slow spot demand. Low Material offtakes in Europe reflect weak steel demand and the general economic outlook.
• POSCO Possibly Leaves Domestic Prices of Austenitic Stainless Sheets Unchanged. According to a source, Korea’s POSCO seems to have left its domestic prices of austenitic ST’s sheets unchanged for the June shipment. Some Taiwanese steel mill is said to have also released their domestic prices of such products for June shipment. Although there is information that it has partly raised them to certain grades, the company is predicted to negotiate individually with customers virtually at leveling off prices. POSCO set out an increase in domestic prices by 100,000 won (US$77) for April shipment, which did not penetrate the market. It was the same as above for the May shipment. Under the situation where Korean domestic demand for STS is still weak, and it is in a difficult state to secure quantity, the source is observing that the company might worry about easily increasing an inflow of such products from Chinese mills and a request for prices decrease by customers amid a fall in prices of material nickel. Demand for austenitic stainless sheets is weak in Asia, including Korea.
• The US extends the temporary suspension of tariffs on Ukrainian steel by another year. The United States suspended tariffs on Ukrainian steel for one year in May last year, months after the Russian invasion began. Last week, the European Union agreed to suspend import restrictions from Ukraine for another year. Then-President Donald Trump in 2018 imposed a tariff of 25% on steel imports from countries including Ukraine. U.S. lawmakers urged President Joe Biden to remove the tariffs after Russia invaded Ukraine in February 2022.
Base Metals & battery materials
• Copper Cathode Rod Companies Scheduled Production Normally. The average operating rate of key copper rod producers using copper cathode was around 80.33% last week, a rise of 0.34 percentage points from the previous week. Copper prices continued to fall last week and rebounded at the end of the week. Sellers were reluctant to sell their goods, and the supply of copper scrap decreased significantly compared with the previous week. Most buyers of copper scrap said that it was difficult to purchase, and raw materials could not meet normal production. Although the supply of copper scrap in various places was relatively tight, Zhejiang mainly uses imported copper scrap, and most suppliers of copper scrap use hedging for risk control. The average price spread between the copper cathode and copper scrap was 924 yuan/mt (US$130.5). As copper prices continued to fall last week, suppliers of copper scrap were more reluctant to sell goods until Friday, when cop-per prices stopped falling and rebounded. The supply increased slightly.
• Cobalt. In the week marking the beginning of June, the Chinese cobalt market reacted to the rising price of cobalt metal and hydroxide payables in the European market, which supported domestic spot price increases. Hydroxide payables increased to 53%-55% compared to the previous level of 51%-53%. A trader said deals of cobalt metal on Thursday were around RMB237,000 /t, while another reported prices between RMB235,000-237,000 /t. Jinchuan metal prices remain unchanged at RMB283,000 /t, but market participants expect some offer adjustment soon. For cobalt sulfate, prices are slowly rising. There has been more procurement from downstream CAM producers, like last week of May, but a refiner told CRU that purchasing activity has been cautious and on a hand-to-mouth basis.
• Battery materials. General Motors and Posco Future M have invested more in their Ultium JV to increase North America’s active cathode material (CAM) production. Now entering the second phase of the JV project, the two companies will look to establish a location for the newly announced CAM and precursor production facility, which will come online sometime in 2024. Having entered a partnership in March 2022, GM and Posco began construction of their cathode materials plant in Bécancour, Quebec, in February 2023, targeting the commencing of commercial operations in 2025. For this plant already under construction, the Canadian federal and provincial governments announced last week that the two companies would receive CAD300 million (USD 223 million) in public funding to assist with the project.
• On the 31st of May, 2023, Korean components manufacturer Hyundai Mobis started the construction of a new battery pack production plant in Indonesia. The production facility in the Deltamas Industrial Complex in Bekasi, near Jakarta, comprises a USD60 million investment scheduled to begin production in the first half of 2024. The cells to be deployed in the new plant’s battery systems will be sourced from HLI Green Power, a joint venture between Hyundai Group and LG Energy Solution, which is also building a plant near Jakarta in Karawang and is scheduled to begin production in the first half next year at a targeted annual production capacity of 10GWh. With Hyundai having opened its first vehicle production plant in Indonesia in 2022, which is the first of the company’s Southeast Asian factories to produce BEVs, the new Hyundai Mobis pack facility completes an EV production ecosystem in the country with an established supply chain from cell to pack to vehicle.
• Nickel. Over the course of the first months of 2023, nickel has been the worst performer among all the LME base metals. This was caused not only by a +45% price increase in 2022 and a following correction but also by worsening market fundamentals. Despite extremely low nickel exchange inventories, which stand at the level last seen in 2007 and amount to less than five days of global use, the LME nickel contract plunged by –30% in 2023 YTD. This was primarily due to a significant market surplus of Class 2 Ni, which appeared in 2022 and is expected to remain throughout 2023-2024, mainly owing to the overproduction of low-grade nickel in Indonesia. Norilsk estimates show that over 100 kt of low-grade nickel were accumulated in 2022, mostly in China, where at least 700 kt gross of NPI stocks are being stored at ports, and significant amounts are likely to be further stockpiled in 2023 as the ramp-up of the new Indonesian nickel capacities continues.
