TELF AG Market Roundup 2024 Week 5

Macro & Energy

Gas: European natural gas futures fell 6% to €26.7 per megawatt-hour this week, marking a six-month low. The decline is attributed to ample inventories, milder weather, and reduced demand. European gas stocks are at 73% capacity, surpassing the five-year average of 69%. Germany, Italy, and France report storage levels of 76.8%, 68.8%, and 63.2%, respectively. Anticipated warmer weather, with a 2.5-degree Celsius increase in Europe, is further reducing heating demand. As a result, Europe may enter spring with over 50% of its underground gas storage capacity available, exceeding the 10-year average of 35%. Despite recent Red Sea attacks, Qatar continues to export gas to Europe, with levels expected to slightly surpass those in November and December.

Freight: Chinese shipping lines are redirecting vessels to the Red Sea and the Suez Canal, taking advantage of perceived immunity from Houthi attacks that have affected other operators. Smaller Chinese lines, like Transfar Shipping, are serving ports
rebel attacks. Two of Trans-far Shipping’s vessels, Zhong Gu Ji Lin and Zhong Gu Shan Dong, are currently operating in the Middle East. The Houthi attacks, which began in late November, targeted ships with alleged links to Israel. The Houthi leaders have declared they won’t attack vessels associated with China or Russia, both allies of Iran. Smaller Chinese lines, such as CULines and Sea Legend, recently launched a Red Sea Express service connecting Jeddah, Saudi Arabia, with various Chinese ports. Major Chinese lines, such as China’s Cosco, are still staying clear of the Red Sea due to security risks. Clarksons, a shipping services company, reports a significant decline in container ship arrivals near the Red Sea’s mouth, with a 90% decrease compared to the first half of December.

Chrome ore

UG2/MG chrome ore prices increased due to renewed buying interest from smelters ahead of the Lunar New Year. Combined chrome ore stocks at major Chinese ports (Tianjin, Qinzhou, Shanghai, and Lianyungang) decreased, ranging from 2.37-2.64 million mt on January 22, compared to 2.54-2.85 million mt the previous week. Turkish lumpy chrome ore prices held firm amid a standoff between buyers and sellers due to rising freight costs related to Red Sea tensions. Chinese customs data indicated a 10% month-on-month and 52% year-on-year increase in chrome ore imports in December, reaching a record monthly high of 1,996,209 mt.

FeCr
FeCr prices in the Chinese spot market remained stable, with muted trading and Taiyuan Iron & Steel Company’s (TISCO) tender price unchanged. Imported charge chrome prices showed stability with limited spot liquidity.
The Chinese ferroalloys market remained quiet. Restocking seems to be complete, and ferroalloy production is reported to be slowing. In particular, some smaller furnaces are reported to have stopped production and started maintenance work ahead of CNY. With both demand subdued and production falling, prices were stable, with cost pressures providing some price support.
HC FeCr prices in Europe saw wider ranges, supported by supply issues, particularly in lower-grade material affected by tensions in the Red Sea. Indian sellers offered material on a FOB basis only due to rising freight rates and increased risks. In the high-grade market, buyers sought material to fill supply chain gaps, supporting some price increases. Reports suggested slight improvements in the order books of stainless-steel producers, leading to increased spot demand for raw materials. Despite the ongoing availability of material at lower prices in Europe, the midpoint of the price range remained unchanged.
HG HC FeCr prices rose to $1.75-2.14/lb Cr DDP this week versus $1.75-2.09/lb Cr DDP the week before. Prices for Kazakh alloy increased on stronger demand for this product amid the delays in supplies from India due to the Red Sea crisis. In these conditions, some end users entered the market to accumulate additional volumes of the alloy, opting to buy directly from producers (according to Metal Expert). LC FeCr (60% Cr; 0.1% C) is still offered at $2.35-2.48/lb Cr DDP this week amid extremely weak activity. The same situation is seen in the segment for high-grade alloy (65-70% Cr; 0.1% C), which can still be bought at $2.45-2.9/lb Cr DDP.
The US HC FeCr market narrowed at the high end of the range due to limited spot trading in the week of January 18. Suppliers adjusted their offerings in response to the lack of consistent spot inquiries. Despite not achieving the higher end of the range, market participants anticipated limited downside due to recent production cuts. Expectations were for limited spot activity in the near term, with little price movement anticipated.

Mn
Chinese manganese ore imports slumped in December, falling 23% m/m from 2.98 Mt to 2.29 Mt. Imports from South Africa were 26% lower m/m, and while imports from Gabon were 44% down on November levels, a 38% m/m rise in arrivals from Australia meant limited impact on high-grade ore availability. The decline in South African imports fits with the lower volume of exports reported in October, and while there was a slight recovery in November, the total remained below the monthly average for 2023. The impact of the lower imports was visible in the fall in port stocks that started in December. This has continued in January. Total port stocks in the w/e 19 January fell a further 0.25 Mt to 5.20 Mt, with stocks at Tianjin down 0.20 Mt to 3.71 Mt. While stocks of all origins were lower, the largest fall was in Gabonese stocks. With limited buying activity, both port and seaborne bi-weekly ore prices were stable.

FeSi.
Spot prices for European FeSi rose as sellers and traders raised offers and concluded deals at higher levels. Spot volumes, however, remain constrained because of low demand from the steel sector. The range for US FeSi prices widened as many sellers struggled to secure new deals, but some businesses were concluded above previous index levels. The market has seen a tug-of-war for months, with some sellers managing to transact at high prices while others have seen their prices stabilize or soften.

Stainless steel
South Korea removes AD duties on stainless steel bars from Japan, India, and Spain. South Korea will terminate nearly 20 years of anti-dumping (AD) duties on imports of STS bars from India, Japan, Spain, Taiwan, and Italy. The tariffs have been in effect since July 30th, 2004, and will end on January 22, 2024. Since the imposition of AD duties, South Korea’s imports of STS bars from the above countries have declined sharply, and the competitiveness of the domestic industry has been put on the track of recovery due to internal and other efforts. The ranges of tariff elimination for stainless steel bars were 3.51%-15.39% for India and 15.39% for Japan and Spain. Anti-dumping tariffs of 9.47% and 18.56% on Taiwanese and Italian STS bars, respectively, will be removed on the 16th of May.
Posco Holdings 2023 net tumbles 48.5 pct amid steel slump. POSCO reported a nearly 49% decline in net profit for 2023, amounting to 1.83 trillion won ($1.37 billion). The company’s sales decreased by 9% to 77.13 trillion won while operating income fell by 27.2% to 3.53 trillion won. The 2023 operating profit was notably lower than the estimated 4.09 trillion won.POSCO attributed the substantial earnings drop to reduced steel prices globally, sluggish performance in its future materials division, and the underwhelming results of its steelmaking subsidiary, as indicated by Meritz Securities Co.’s recent report.
Steel Dynamics targets 80% output at Sinton Mill in 2024. Steel Dynamics Sinton has been operating at 75% capacity in January but targets 80% utilization of its full 3mil-lion mt per year capacity this year as it continues to ramp up. SD’s Sinton plant had faced technical challenges but is expected to see additional production improvement, allowing access to 100% of melt capacity as opposed to 80%.

Tata’s Q4 crude steel production rises in India and falls in Europe. India’s steel demand continues to improve while Europe’s remains subdued. In Q4 2023, Tata Steel produced 7.58 million mt of crude steel across its operations, up 0.3% YoY and 3.6% QoQ. Tata Steel operations in India produced 5.35 million mt of crude steel in Q4 2023, up 7% YoY and 6.6% QoQ. Deliveries in India for Q4 2023 reached 4.88 million mt, up 10% YoY and 3% QoQ, with higher sales across key end-use segments. Tata’s 5 million mt per year capacity expansion at its Kalinganagar project in India is underway. The project has India’s largest blast furnace (BF), supported by a 6 million mt per year pellet plant. In Europe, Tata Steel UK produced 720,000 mt in Q4 2023, in line with 2022’s production; however, it was down from 760,000 mt in Q3 2023. Tata Steel announced last week that it will shut its 2 BFs at Port Talbot by the end of the year to shift to lower carbon steel with an EAF. The EAF is set to be commissioned by 2027. Tata Steel Nederland produced 1.19 million mt of crude steel in Q4 2023, in line with the previous quarter but down YoY, where it produced 1.52 million MT.
Tata Steel Neder-land expects to restart BF 6 at Ijmuiden by the end of this month.
Outokumpu buys into Recycler. The company has acquired a 10% stake in German Recycler Cronimet. The main motive is to secure sourcing of high-quality scrap closer to its steel-making operations in Northeastern Europe. Both companies will also cooperate on joint R6D to improve technologies to reduce CO2 emissions, lower costs, and reduce waste.

Base Metals
Jiangxi to boost output capabilities. China’s Jiangxi Copper Company (JCC) will install a rolling mill at its Nanchang plant in Jiangxi province next year, enabling an increase in flat product capacity of around 15,000.
Chinese firm JCHX will acquire an underperforming Zambian copper mine. JCHX plans to acquire Zambia’s Lubambe copper mine for a token of $2, aiming to improve its operations and profitability. Despite being a loss-making mine that has not reached its design capacity, JCHX is confident that with better mining and treatment schemes, the mine can produce an average of 77,500 tons per year of copper contained-in-concentrate and 32,500 tons per year of copper metal. JCHX estimates a
CAPEX of $305 million for technological upgrades, believing these investments can turn the mine profitable. Lubambe reported a net loss of $60.3 million in the first nine months of the previous year. JCHX will pay $1 for an 80% stake in Lubambe and assume its $857 million debt from EMR Capital, while the Zambian government retains 20% ownership. The mine is in the second quartile of CRU’s cost curve for global copper mines, with cash costs of $3,263 per ton, excluding royalties, and produced 24,900 tons last year.
Canada-based Capstone Copper expects this year to be a tale of two halves, with H2 providing a glimpse of the company’s new production and cost performance following the ramp-up of the Mantoverde development project (MVDP) in northern Chile, says CEO John MacKenzie. First, ore was fed through the primary crushing circuit during Q4, with maiden ore expected this quarter in the grinding circuit and the first saleable concentrate anticipated during Q2. MDVP’s capex budget is US$870 M (€801 M). Capstone is guiding Mantoverde’s sulfide copper production of 25,000 t to 35,000 t in H2, with the concentrator achieving nameplate operating rates of 32,000 t/day during Q3. The mine’s cathode production is expected to be consistent year-on-year: this year’s guided range is 36,000 t to 40,000 t.
The Kambalda nickel mines run by Wyloo Metals in Western Australia will be put in care and maintenance by 31 May in response to a near halving in the metal’s price in the past year. Consequences include BHP planning to cut back on operations at a concentrator that takes feedstock from the mines. “The decision by Wyloo to suspend its operations means it will no longer be viable to continue operating parts of the Kambalda concentrator from mid-year,” said the mining giant’s Nickel West president Jessica Farrell, who described the current market as a very tough operating environment.

Battery materials
Australia-based Sayona Mining has started an operational review of its North American Lithium (NAL) mine in Quebec’s Abitibi-Temiscamingue region in response to the fall in the price of the commodity. Fifteen employees have already been made redundant. The study will focus on reducing costs, enhancing productivity, and improving the company’s ability to continue to produce lithium throughout the market cycle, said interim CEO James Brown. “As the only operating hard rock lithium mine in North America, NAL is well positioned to remain a strategic source of lithium for the North American battery and EV market,” he added. “While current market conditions are challenging, we are confident that the long-term outlook for lithium remains positive as the energy transition gains momentum and the shift to an electrified world continues.” Shipments from NAL began last August, and Sayona is ramping up to the mine’s nameplate capacity of as much as 220,000 t/y of spodumene concentrate or 30,000 t/y of lithium carbonate equivalent (LCE).
Chinese cobalt metal prices held steady for a second week as market activity slowed ahead of the Chinese New Year holiday that begins on 10 February. Spot supply remained relatively tight, but demand was also bleak. Downstream buyers were only purchasing on a hand-to-mouth basis amid a gloomy outlook for the post-holiday market.