TELF AG Market Round Up 2023 Week 43
Macro & Energy
Gas: European natural gas futures rise on Middle East Conflict. European natural gas futures rose 51 EUR/MWh, up more than 30% since the Israel-Hamas conflict on October 7th. Iran’s potential involvement poses serious security risks for Qatari LNG vessels transiting through the Strait of Hormuz. Israel has shut down a major gas field, which may affect LNG exports from Egypt. Upward prices have been mitigated by ample gas supplies and mild winter forecasts so far. European LNG storage in France, Germany, and Italy is at 98% capacity.
Macro: On the macro front, against the background that the range of the Fed’s interest rate announcement in September was the same as the previous value, Fed Chairman Powell’s speech hinted that the Fed may be prepared to further raise interest rates under appropriate circumstances. Since then, the Federal Reserve has laid off employees for the first time since its expansion, and other actions have led to increased market expectations that the Federal Reserve may raise interest rates once in the second half of the year. The market reaction has been that the U.S. dollar continues to strengthen, and commodities are under pressure.
China’s economy showed a sequential recovery in 2023 Q3 with a growth rate of 4.9% y/y, slightly above the market expectations of 4.5%. The recovery in Q3 was driven by service consumption, continued government investment in infrastructure, and relatively resilient export performance. However, the economy still faces headwinds from the crippled property sector, local government debt risks, and subdued sentiment. While the measures introduced since the July Politburo meeting may suffice to assist the economy in reaching its annual growth target for this year, policymakers are deliberating on measures to sustain growth momentum for the coming year.
Chrome ore
UG2/MG chrome ore prices dipped post-Golden Week holiday, with lower ferrochrome prices due to stainless steel mill maintenance and oversupply concerns. Nevertheless, chrome ore had a limited downside as supply remained tight while port inventories decreased. Turkish lumpy chrome ore prices held steady with limited trading.
FeCr
– China’s HC FeCr price declined on Tuesday as sellers reduced offers in response to muted buying interest and weakened Cr ore prices. Despite this effort, trade remained inactive as the market still lacks confidence, and players expect additional near-term price decreases
– In the EU, high-grade HC FeCr prices were stable, with some reports of cheaper material in the spot market. Lower-grade prices were flat as sellers in India awaited an upcoming chrome ore auction, facing cost challenges amid weak European demand. Some sellers considered reducing offers.
– In the US, high-carbon ferrochrome prices remained unchanged after a brief surge in the previous week. Long-term contract discussions for 2024 have begun, with potential downward pressure due to lower overseas prices. Prices for US LC, 0.1% C, declined this week as sellers continued to lower offers in a competitive spot market. As year-end approaches, end-users are buying on a hand-to-mouth basis and looking to keep spending low by finding the best possible price for raw materials.
Mn
– Chinese EMM prices increased this week as sellers raised offers after some South China-based smelters reportedly shut down due to low prices. Trade remained sluggish despite the higher offers and improved market mood.
– Chinese port Mn ore prices fell this week as traders reduced offers to entice buying interest in a weakening market. “Traders are aggressively trying to sell Gabon ores, causing the price to drop quickly,” a major Shanghai trader said. Trade remained muted despite the price reductions. However, the Shanghai trader said that current prices are below replacement costs, and thus, sales may be paused altogether.
– Chinese domestic SiMn prices moved down this week as low futures prices dampened the market mood, and smelters cut offers to boost sales. The December contract on the Zhengzhou Commodity Exchange dropped to its lowest level since mid-July at RMB6,602 /t on Friday.
FeSi.
– Domestic Chinese FeSi prices also dropped following recent dramatic price falls on the futures market. FeSi futures on the Zhengzhou Commodity Exchange started decreasing in late September and slid more drastically after the market reopened from the Golden Week holiday
– US FeSi prices dropped on Thursday as deals were concluded in a wide range that skewed considerably lower than previous index levels. Concluded deal prices varied widely despite a narrower tonnage range. Most deals were for around 100 tons or less, which sources attributed to slim seller inventories as well as modest demand
– Acroni restarts stainless steel making after equipment outage. SIJ says it has resumed production at Acroni’s hot rolling mill three months after the rolling frame’s main engine failed. Extensive repairs are said to have been made. The substantial damage has greatly impacted the group’s future operations, SIJ says. This comes after the group’s Metal Ravne’s forging shop was disrupted for three weeks due to severe floods, forcing them to declare force majeure.
– Supply tightness contributes to price growth in the European STS market. Production cuts from SIJ Group contributed to the general tightness of the European market in September. Aperam lowered its production guidance for Q4 2023
– The recently announced European Commission (EC) investigation into imported STS from Vietnam, Taiwan, and Turkey led to lower interest in imported material on the European market
– In October, concerns about nickel ore supply in Indonesia have eased somewhat, but the high nickel ore price has limited the downward space of high-grade NPI prices. The cost of stainless steel remains strong while prices continue to decline, causing serious profit inversion for stainless steel mills. In October, the rainy season in the Philippines will support the cost of NPI to some extent. Although high-carbon ferrochrome price has fallen, the space is limited, and downstream orders for stainless steel are still not optimistic. Stainless steel demand is expected to remain weak, and with the synchronous weakening of supply and demand, some steel mills will announce production reductions due to continuous losses. Stainless steel production of the 300-series is expected to decrease in October. Overall, the cost support in October is still strong, but demand has not improved. The market holds a cautious attitude towards output reduction by stainless steel mills and whether social inventories can be digested. As such, stainless steel price is expected to continue its weak trend in October
Base Metals
– Several key takeaways for the copper market from LME Week in London. Key themes include the short-term demand outlook, the role of the green energy transition, the supply response, and the direction of the concentrates market:
– Bearish outlook for the short term. The tone of LME week was bearish, especially for those factoring in a refined market surplus next year. Despite some challenges, the long-term bull case for copper remains sustainable, with considerable outside investor interest
– Nonetheless, copper consumption will grow in 2024 (CRU = 2.7%). The balance of risks to the upside for China and downside for the World (delayed recovery)
– Realistic on energy transition. Concerns that GET supply chains outside China are not developing quickly enough. The idea of substitution and thrifting of copper in GET applications continues to gain traction. Future copper requirements in the electricity grid are a major upside and downside risk
– China and DRC to drive 2024 supply growth
– Secondary units will fill some of the gap. Scrap accounts for 30% of the copper market, and it remains the obvious partial solution to the impending supply gap
New smelters to change the shape of the custom market. The start-up of new Indonesian and Indian smelting capacity next year will result in significant concentrate market deficits in 2025 and 2026. The assumption is that uncommitted Chinese smelter capacity expansions will be limited.
Battery materials
– Overall market sentiment remained unchanged as cobalt sulfate demand from the EV market continued to be limited. However, market participants reported increasing tightness of raw material supply. Refiners commented that shipping delays have facilitated slow delivery of cobalt intermediates into Chinese ports, although hydroxide production in the DRC remains robust. Traders reported that prices were around RMB250,000 /t at the end of the assessment period with limited procurement interest. Their inventories have been run down, suggesting some restocking could occur in the near term.
– NMC CAM refiners continued to hold off from purchasing cobalt sulfate; however, early in the assessment period, LCO producers procured some material for processing into cobalt oxide.
– Nickel sulfate prices were virtually unchanged week on week. Refiners reported that there has been little change since the previous assessment, with limited buying interest and high raw material costs. Spot market activity was particularly muted, and participants expect the market to remain quiet with rangebound prices in the near term.
– Toronto-headquartered Canada Nickel says a bankable feasibility study on its proposed Crawford mine at Timmins, Ontario, shows peak production averaging 48,000 t/y of nickel plus byproducts is possible. The project includes a carbon capture plant. Canada Nickel describes Crawford as the world’s second-largest nickel reserve. He forecasted production over a projected 41-year mine life to be 1.6 Mt of nickel, 24,000 t of cobalt, 490,000 oz of palladium and platinum, 58 Mt of iron ore, and 2.8 Mt of chromium. The average nickel output during the 41 years will be 38,000 t/y.
– In late September, Swedish battery cell manufacturer Northvolt announced it would construct a battery gigafactory in Quebec, Canada. Construction is anticipated to begin later in 2023, with the first production expected in 2026. Although integrated CAM and recycling production will help with Northvolt’s cost efficiency, CRU anticipates the company will act as a secondary supplier to its customers in the region.
