TELF AG 2023 Market Roundup 2023 Week 31
Macro
• Oil. Brent crude futures eased below $84 per barrel on Friday but were still set to gain for the fifth consecutive week, underpinned by tightening global supplies and an improving outlook in Chinese demand. The international oil benchmark has rallied more than 10% this month as voluntary output cuts by Saudi Arabia are expected to tighten crude supply. At the same time, OPEC+ indicated a willingness to take further action to support the oil market. On the demand side, Chinese authorities pledged to shore up a slowing economy, raising hopes for a stronger rebound in the country’s fuel consumption. Meanwhile, the US Federal Reserve and the European Central Bank raised interest rates further in July to bring down stubborn inflation, stoking fears of weaker long-term demand and hurting market sentiment.
• Gas. European natural gas prices eased to below €29 per megawatt-hour as ample gas inventories outweigh supply risks, and the heat wave impacting the region is starting to subside. Record-high temperatures have increased gas demand in countries like Italy, but demand is expected to decrease as the heat wave eases. Additionally, wind generation is anticipated to rise in countries like Germany and the UK, which will reduce their reliance on gas for power generation. Gas storage sites in Europe are at around 84% of capacity, with Germany’s storage at 86%, and at least two months remain in the summer gas-injection season. Despite the surplus, Europe is competing with Asia for available liquefied natural gas (LNG), and planned maintenance at major facilities in Norway will also curb supply in the coming weeks.
• Freight. The BDI rose by 2.8% to 1,097 points on Thursday, the highest in two weeks. The capesize index, which tracks vessels typically transporting 150,000-tonne cargoes such as iron ore and coal, increased by 3.9% to 1,801 points, the highest in over five weeks. Capesize shipping rates are experiencing an upward trend due to the demand for iron ore from South America to China, coal shipments from Colombia to Europe, and increased demand for soybeans from Brazil to China. However, certain factors, such as the real estate crisis in China and slow global economic conditions, may limit the potential for further rate increases in the shipping market. The panamax index, which tracks ships that usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, surged by 4.3% to 955 points. Meanwhile, the supramax index fell by 1.2% to 753 points.
Ferro-alloys
• Chrome ore. UG2/MG Cr ore prices remained stable in the week to Tuesday, with industry participants responding calmly to the latest monthly ferrochrome tender price announced by major Chinese STS mill Tsingshan. Turkish lumpy Cr ore prices were also stable, with a general dearth of spot indications, especially as the summer lull persists on the sell side. Meanwhile, according to customs data from China, the country imported 1.51 mln MT of Cr ore in June, down by 10% monthly but up by 19% year on year. The data also showed China imported 130,000 MT of FeCr in June, down by 40% monthly but up by 1% yearly. Chrome ore stocks at Chinese ports on the 28th of July were 2.088 mln mt, a decrease of 14kt. Stocks in weeks of consumption – 6 weeks.
FeCr.
• Tsingshan reduced the tender price for August-delivery high carbon ferrochrome to 8,695 yuan ($1,209) per tonne, a decline of 100 yuan per tonne from the July tender. The decline came below expectations from some market participants and lent some support to the domestic market. Ferro-chrome prices in the Chinese domestic market were unchanged during the week, although some participants expressed concern over competition with imported material. Imported charge chrome prices remained unchanged during the week amid limited spot activity. However, one trader source suggested he viewed the latest tender price as a positive indicator in light of the modest decline.
• HC FeCr prices in Europe were relatively stable during the week to July 25, with limited spot activity, although some suggested that levels may have bottomed out. One source on the sell side suggested the downward pressure seen in recent weeks had subsided, with the expectation of increased demand as steel mills begin to reopen after the summer. Higher grade (65-70% Cr) saw a small uptick on the low end of the range, marking an overall increase in percentage terms even though the high end came down slightly, as offers were reported at fractionally lower levels. Meanwhile, amid reports of rising Cr ore prices domestically in India leading to higher input costs, lower grade (60-64.9%) prices ticked up slightly on both ends of the range. Spot activity was stronger in the lower grade market during the week to July 25, with higher volumes of material reportedly changing hands compared with recent weeks, and the better-than-expected Chinese tender price also provided support.
• The US HC FeCr price tumbled on Thursday, July 28, while spot market trading activity remained lackluster. Buyers largely continued to hold out from spot market purchasing, forcing suppliers to lower offers to entice prospective buyers. Steel mills and foundries continue to meet their FeCr needs through contract deliveries with little need for additional material through the spot market. Market participants suspect prices may continue to sag through the sluggish summer period.
• EU LC FeCr, 0.1% prices, traded slightly lower this week in an illiquid spot market. No transactions could be verified above the $310c /lb level, and market participants agreed that supply and demand in the spot market have balanced after weeks of steady decline.
Mn ore.
• Offer prices for high-grade manganese in China have dipped further this week, with offers for September shipment reported to be $4.30-$4.60 /dmtu. The moves reflect continued subdued demand with stronger supply. Not only has Gabonese supply recovered from earlier disruption but the import data for June show that, at 0.45 Mt, arrivals from Australia hit the highest level since January. Imports from Brazil were also up, and at the lower end of the grade spectrum, Ghanaian imports were at their highest level for over a year.
FeSi.
• FeSi confidence returns amid positive policies, but demand remains poor. The Chinese FeSi market regained some confidence this week following a proposal by the Political Bureau of the CPC Central Committee on the 24th of July which proposed plans to adapt to the major changes in the Chinese real estate market regarding supply and demand and optimizing real estate policies. These include positive signals such as removing mortgage limits and reducing down payments. Spot FeSi prices, however, remained weak in the traditional off-season due to the depreciating yuan against the US dollar and downstream steel production cuts. The main reasons for the weaker ferrosilicon market are declining steel mill tenders’ prices and mills buying less FeSi. Ferro-silicon 75% Si min export, fob China was $1,320-1,350 per tonne on Wednesday, narrowing downward by 1.11% at $1,320-1,380 a week earlier.
• China’s STS prices increase on government stimulus. China’s STS prices on domestic and export markets increased over the week ending Wednesday, July 26, following a raft of stimulus policies released by the country’s central government. Chinese authorities released policies that are intended to support the recovery of private companies in the aspects of financing, legal system, and “cultivation company leaders,” among others, according to a notice released by the country’s National Development and Reform Commission (NDRC)
• STS cold-rolled coil 2mm grade 304 export, fob China was at $2,220-2,300 per tonne on July 26, up by $40-90 per tonne from $2,130-2,160 per tonne on July 19. Stainless hot-rolled coil grade 304 export, fob China was at $2,150-2,220 per tonne on July 26, up by $70-120 from $2,030-2,050 per tonne on July 19. The demand in other countries or regions remained weak, and buyers are not very bullish on China’s domestic STS prices, so they aren’t eager to buy.
Base Metals
• Base metals prices on the London Metal Exchange were mixed at the close on Monday, July 31, with aluminum and zinc the strongest performers.
o The three-month aluminum price hit $2,289 per tonne earlier on Monday, its highest since July 14. The closing price is up 5.8% from where the metal opened in July. “In line with our expectation, China’s primary aluminum production in June experienced year-on-year growth, driven by the resumption of operations in smelters located in southwestern Yunnan province. The local power usage restrictions were eased, allowing for increased production,” Fastmarkets’ analysts say. Despite rising underlying prices, aluminum premiums remain under pressure from weak demand.
o Copper’s three-month price opened July at $8,317 per tonne, meaning that — as of the 5 pm close — it had climbed 6.19% during July. LME copper prices were on track on Monday for the best monthly performance since January, following the prospect of further stimulus in Chinese consumption and speculation that the US Federal Reserve may pause rate hikes for the year.
• Nickel. Premiums for EU full-plate cathode have declined amid weak demand. Market activity in Europe is slow as buyers aim to limit inventories during the summer lull.
Battery materials.
• During the 21-27 July assessment period, cobalt metal prices were recorded within the range of RMB 250,000-330,000 /t, decreasing from RMB 255,000-330,000 /t. Market participants exercised cautiousness in procuring metal and sulfate due to falling prices. Traders reported that offers of RMB250,000 /t were not accepted, given the rapid decrease in the Wuxi Stainless Exchange’s futures prices. Consequently, the spot market was quiet during the assessment period. Offer prices also decreased, reflecting the lack of purchasing interest. One refiner, whose prices had retreated to the top end of the recorded range, commented that RMB 44,000 /t was still considered “a high price” in the current market. “Many offers are heard around RMB43,000 /t in the market with limited procurement”, she added.
