TELF AG 2023 Market Roundup 2023 Week 33
Macro
Oil: Oil prices edged higher on the week starting 14th August as China unexpectedly cut key policy rates for the second time in three months to shore up a sputtering economic recovery, but sluggish economic data from the country put a lid on gains. Brent crude futures rose 11 cents, or 0.1%, to trade at $86.32 per barrel at 0414 GMT. U.S. West Texas Intermediate crude was up 7 cents, also 0.1%, to $82.57 a barrel. Prices turned higher after the People’s Bank of China (PBOC) lowered the rate on 401 billion yuan ($55.25 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 15 basis points to 2.50% from 2.65%. Also lending support to oil prices, Japan’s economy grew much faster than expected from April to June, as brisk auto exports and tourist arrivals helped offset the drag from a slowing post-COVID consumer recovery. Meanwhile, oil and natural gas output from top U.S. shale-producing regions is set to fall in September for the second straight month to the lowest levels since May; Energy Information Administration data showed on Monday. The declining U.S. output could exacerbate the global oil supply tightness as the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, are cutting production.
Electricity in Europe: Germany: prices are currently just above 80 EUR/MWh, a significant fall from 2022 highs, in part thanks to lower prices on commodity markets, a forecasted decline in consumption brought on by warmer weather, and also government energy price breaks. Spain: Prices are currently below 100 EUR/MWh, well below the monthly average of 152 EUR/MWh, same time last year. Moving in tandem with lower natural gas prices amid sluggish industrial and household demand. Furthermore, the “Iberian Exemption” extension request by Spain and Portugal has been approved by the European Commission until the end of 2023. The agreement separates the price paid for natural gas used in the energy mix from that paid for the less costly sources like solar, nuclear, or hydro. France: Prices are around 159 EUR/MWh, the highest since the start of 2023. France’s cap on electricity price growth rose from 4% in 2022 to 15% in 2023. Italy: Prices hovering between 100-115 EUR/MWh, lowered due to lower natural gas prices and forecasted decrease in demand.
Freight: The BDI fell about 0.6% to a near one-week low of 1,137 points on Thursday, pressured by the larger capesize segment. The capesize index, which tracks vessels typically transporting 150,000-tonne cargoes such as iron ore and coal, was down for the third straight session, slumping 4.5% to 1,674 points. On the other hand, the Panamax index, which tracks ships that usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, extended gains for the 12th straight session, rising 4.8% to a near three-month high of 1,292 points, and the supramax index added 10 points, or 1.4%, to 706 points.
Ferro-alloys
Chrome ore: UG2 Cr ore prices were firmer during the week to Tuesday, August 8, with stronger demand from Chinese smelters as they looked to replenish stocks, while port inventories remained tight. According to Fastmarkets’ data collection, port inventories of Cr ore in China were in the range of 1.98 mln-2.26 mln tonnes in the week to Monday, more or less flat against the week before. This would cover only a little over a month’s worth of production of FeCr in the country, according to industry participants. FeCr prices in the Chinese domestic market moved up, with cost support from the higher Cr ore prices, as well as higher Coke prices. Imported charge chrome prices also increased, following the same trajectory as domestic prices. Turkish lumpy Cr ore prices edged higher as well, supported by generally firmer sentiment, including on the buy side. There has also been support across Cr ore and FeCr from strong STS output in China, along with ongoing logistical challenges in South Africa.
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, although one trader source suggested he viewed the latest tender price as a positive indicator in light of the modest decline.
• HC FeCr markets in Europe remained extremely quiet during the week of August 8, with a dearth of spot activity. Even as buyers remained absent from the spot market, sell-side sources continued to report that prices had more than likely bottomed out, however, with consumers at least considering their needs ahead of a return to the market. There was also some suggestion that buyers may look to secure material now, ahead of an expected increase in prices into the fourth quarter. In the lower grade (60-64.9% Cr) market, there were also reports that the monsoon season in India — a production hub for the material – had affected Cr ore mining, which could, in turn, limit FeCr production. There was no clear price reaction in the spot market, however, with only a modest increase on the low end of the range during the week.
• The US HC FeCr market held flat during the week ended August 3, with activity in the spot market remaining limited during the slowed summer period. Market participants noted a lack of consumer interest in the spot market because most mills are completely covered through long-term contract deliveries at this time. Maintenance outages and a slower summer melt schedule at many mills have prevented the need for additional material from the spot market. Market participants suspect this sluggish spot market will continue through the near term.
Mn
• The Chinese SiMn market strengthened with higher transaction prices and increased optimism after major mills announced more tender price increases. Hesteel Group finally settled its August tender price at higher levels than its initial bid and its July tender price, according to local market sources. SiMn futures prices have been trending upward since the second week of July, in line with other ferrous commodity futures price gains, as market sentiment strengthened on positive signals from the recent Political Bureau meeting on economic work. Domestic spot prices for Indian SiMn 60% Mn and HC FeMn 70% fell on subdued demand and a weak market outlook. Indian Mn alloy production has declined, but supply continues to outpace demand.
FeSi
• In the US, the market was very quiet due to maintenance periods and European summer holidays. In Europe, market participants described the spot market as inactive because mills have not been actively spot purchasing during the slow summer period. Sources expect trading to remain limited over the near term, with most mills continuing to have their FeSi requirements met through contract deliveries and no need to augment supply through the spot market.
• STS prices rose for the first time since February as European Mills’ offer picked up in July amid speculative buying. European stainless prices for fresh production from mills rebounded in July for the first time after prices collapsed by a total of ~€1,200 /t for CR 304 from February to June. Real demand from end-users remains conservative under weak macroeconomic conditions. Some distributors inform us that their orders in July have declined m/m as Europe enters the holiday season. However, mills’ order books have strengthened m/m, supported by an increase in purchases from distributors.
Base Metals
Copper: China’s copper cathode output in July was 925,900 MT, an increase of 8,000 MT or 0.9% MoM and a growth of 10.2% YoY; The output increased by 23,800 MT compared with the expected 902,100 MT. The output totaled 6.49 million MT from January to July, an increase of 639,300 MT or 10.94% YoY. The cumulative output from January to August is expected to be 7.47 million mt, an increase of 11.47% or 768,900 mt year-on-year.
Nickel: Australia-based Nickel Industries says its Hengjaya mine in Indonesia will increase shipments of nickel laterite ore to 10 Mt/y from 3.5 Mt/y following the completion of a haul road to Morowali Industrial Park in Central Sulawesi. Trucking is scheduled to begin this month, and the company aims to reach the 10 Mt/y run rate by year-end.
Battery materials
• Cobalt metal and sulfate prices in China declined as market sentiment remained largely bearish, with battery demand for cobalt remaining slow. Ex-China prices and intermediate payables have also fallen, despite healthier demand ex-China.
• Tesla steps up lithium supply deal with Yahua. In early August, Tesla extended its supply contract with Chinese lithium refiner Sichuan Yahua Industrial Group through to 2030. Not only has the contract timeframe been extended, but the volume of material has increased significantly. Yahua previously signed a five-year contract in January 2021 to supply Tesla with 63,000 to 88,000 tonnes of lithium hydroxide over a five-year period. Under the new contract, Yahua will supply Tesla with 207,000 to 301,000 tonnes between August 2023 and December 2030, including material from the previous deal. The refiner will provide lithium hydroxide to Tesla, indicating that the material will be used for NMC and NCA cell production. No details regarding the cost of the deal have been publicly announced. Tesla’s transition to in-house cell production has added to the automaker’s lithium requirements. The company’s in-house production capacity reached 50 GWh in 2022, and by 2027, it will swell to over 200 GWh. This will be bolstered further by cells supplied by an array of other battery manufacturers, including Panasonic, LG ES, and CATL. In 2027, Tesla’s demand for high-nickel cells is anticipated to reach 90 GWh, requiring up to 70,000 t/y of lithium hydroxide, according to CRU data. Although Tesla is one of Yahua’s largest customers, it also has supply deals with South Korean cell manufacturers SK On and LG ES. Lithium production is also increasing to meet growing downstream demand, with Yahua’s production capacity growing from 54,000 t/y LCE in 2022 to 118,000 t/y LCE in 2027, a 120% increase.
• More stringent targets for the recycling of batteries are about to enter into force in the European Union (EU) after heads of government who met at the Council of the EU moved to rubber-stamp the bloc’s battery regulation this week. The Council approved the regulation on Monday, July 13, following the adoption of the revamping of the EU battery directive by members of the European Parliament last month. Following the ratification this week, the battery regulation will now be signed by the Council and the European Parliament before publication in the EU’s official journal – it enters into force 20 days after publishing, according to the EU. Among the key changes introduced by the updated rules are formal targets for the recycling of batteries. The regulation sets targets for producers to collect waste portable batteries by 63% by the end of 2027 and 73% by the end of 2030.
It also introduces a bespoke collection objective for waste batteries for light means of transport, defined as wheeled vehicles that have an electric motor of less than 750 watts. Those targets are 51% by the end of 2028 and 61% by the end of 2031. For lithium recovery from waste batteries, the target is set at 50% by the end of 2027 and 80% by the end of 2031. Mandatory minimum levels of recycled content have also been introduced for industrial, rechargeable lead acid SLI batteries and electric vehicle (EV) batteries. These are initially set at 16% for cobalt, 85% for lead, 6% for lithium, and 6% for nickel.
