TELF AG Market Roundup Week 50
Macro & Energy
Brent crude prices remain subdued despite tight supply conditions, and it is currently trading at a low $70s. Futures markets show limited concern about potential supply disruptions. Ample global spare capacity, including OPEC+ spare capacity at historical highs, is expected to cushion any sustained price impacts. Lower inventory levels highlight market confidence in supply continuity and sustained low prices. US commercial inventories and global stock levels remain below historical averages, while the market structure shows mild backwardation compared to recent years. Past strong backwardation, combined with high interest rates, may have encouraged refiners and distributors to rely on just-in-time purchasing, particularly in a low and range-bound price environment. Global crude demand is forecast to remain subdued in 2025. China, after near-zero growth this year, is expected to grow by just 260 kbbl/d. Europe will remain a drag, with demand contracting by 600 kbbl/d y/y. Non-OPEC production is expected to continue growing robustly. OPEC+ is set to gradually restore production next year, likely resulting in a supply surplus by 2025 Q2.
The US will likely strengthen its LNG market influence under Trump. US LNG exports are expected to increase, driven by likely repeals of restrictions on LNG exports to non-FTA countries. This policy shift would increase export volumes and expand the US’s influence in global LNG markets. Additionally, Trump’s deregulatory agenda could result in higher domestic natural gas production, ensuring ample supply to meet both domestic and international demand. Under Trump’s administration, supportive policies could accelerate the realization of planned capacities, further expanding the export capabilities of the US.
China’s GDP and industrial production (IP) growth forecasts for 2024 have been upgraded, reflecting strong demand for exports and policy stimulus. The front-loading of export orders accelerated in October, while policy measures have sustained public investment and stimulated durables consumption, positioning China for a more robust economic performance in the near term. However, the medium-term outlook for China’s economy from 2025 to 2028 has been downgraded due to potential trade tensions and geopolitical risks that could disrupt global supply chains and dampen export demand. As traditional stimulus measures may lose effectiveness over time, the economy faces challenges in maintaining momentum. Persistent deflationary pressures during the forecasting period from 2024 to 2029 further complicate the landscape, with CPI inflation likely remaining below the government’s 3% target.
Chrome ore
Through November, all ore prices assessed by CRU fell for the third consecutive month. An oversupply of ferrochrome in China has caused stainless mills to lower tender price offers, squeezing profit margins for smelters who have, in turn, reduced price offers on chrome ore.
UG2 prices fell by only 2.4% to an average of $267 /t in November. This small reduction is in part due to prices falling by close to 9% through October and subsequent illiquidity as miners attempt to hold firm on price. Other South African ore prices fell by much more; 44% concentrate fell by 6.5% to average $300 /t in November, while 38-40% lumpy prices dropped 6.3% to average $253 /t. Elsewhere, Turkish chrome ore prices fell by a similar magnitude over November, with 48% concentrate falling 6.3% to average $372 /t and 42% concentrate falling 5.9% to average $313 /t.
Chinese chrome ore port stocks increased marginally to 2.4 Mt in November. As expected, some domestic smelters cut their production due to the falling HC FeCr tender prices. The increase in the port stocks was primarily attributed to this cut in production. As the December HC FeCr tender prices continued to decline, domestic smelters will likely cut production further due to the ongoing squeeze on profit margins. Yet, as miners are holding firm on ore prices currently, we expect chrome ore port stocks to stay rangebound to the end of 2024.
FeCr
Chinese HC FeCr output decreased by 3.6% m/m in November to 734 kt, dropping to the lowest level since April 2024. Both southern and northern smelters cut production. Among all provinces, Shanxi experienced the most significant drop in production, with a m/m decrease of 45%, as a major smelter shut down production for a maintenance campaign. Conversely, Inner Mongolia, the largest province, registered an increase in November, with production rising by 1% m/m to 544 kt. Some major smelters in Inner Mongolia will start maintenance campaigns in mid-December. The output from Inner Mongolia is expected to come down in December. Given the concentration of smelting capacity in Inner Mongolia, even a slight decrease in percentage terms here would see a large absolute decrease in total Chinese smelter production. From a demand perspective, the support from downstream stainless production to HC FeCr has become progressively weaker. Major steel mills announced a m/m drop of RMB 300-700 /50 basis tons in December’s HC FeCr tender prices. The sustained drop in tender prices for the past few months has little sign of ending. We anticipate this to be the largest driver of the reduced utilization rates at Chinese smelters and the reason for maintenance campaigns being commissioned during this period.
European HC FeCr price falls outpace that of the US equivalent. Following a brief period from July to October, when the trend reversed, US HC FeCr prices regained a premium over EU FeCr prices. In November, US FeCr prices fell by 5% to average 140 c/lb, while European prices fell by 9% to average 126 c/lb.
Weak downstream demand, particularly in the second half of the year, has been the driver for weak prices in both regions, and as the Western hemisphere approaches the holiday period, we expect demand to remain subdued. We do not expect prices to make gains until well into the new calendar year, as falling chrome ore prices will also put some pressure on HC FeCr prices. US HC FeCr prices could rise faster and higher if Trump imposes any tariffs when he takes office. This is something we will continue to monitor.
As published in their latest November report, CRU retains their view that the global HC FeCr market will continue to be in a significant surplus in the final quarter of 2024. This is driven by a large stockpile of HC FeCr in China as smelter production has remained strong alongside robust imports of HC FeCr. This supply of material in China has outpaced the domestic stainless production growth despite this remaining above growth in many other regions. We have been informed several stainless operations in China hold enough inventory of HC FeCr to last several or more weeks. Elsewhere, weak downstream demand for HC FeCr has caused reduced utilization rates at smelters as they look to prioritize marginality and position themselves to take advantage of any recovery in demand in 2025.
Mn
The monthly semi-carbonate ore price rose for the first time since June. There were signs in November that ore prices have reached the bottom and are starting to turn the corner. The CIF China price for 36-38% Mn ore rose 1.8% m/m from $3.73 /dmtu to $3.79 /dmtu. With the price moving up in the middle of the month, the month-end bi-weekly range sat at $3.80 – $3.90 /dmtu. Semi-carbonate prices started falling in early July and reached a low at the end of September, and prices have been stable since. Pressure has been building from suppliers for several months for a rise, but the opportunity was limited by developments in the high-grade market. By contrast, the monthly 44% Mn ore price fell 4.5% m/m to $4.00 /dmtu. However, there was no change during the month. The month-on-month premium for 44% Mn ore fell to $0.21 /dmtu, although at $0.15 /dmtu, the premium at the end of November was even lower. There were reports that this resulted in high-grade ores with discounts for undesirable elements being sold below the semi-carbonate price.
Eramet’s production halt at the high-grade Moanda mine ran for three weeks during November and came on top of the sharp cut in high-grade ore prices in October. The aim was to rebalance demand and supply for this grade, so the market is expecting suppliers to raise prices shortly.
South African exports in October dropped by 19% m/m to 1.86 Mt, the lowest level since April. Exports to China were over 0.2 Mt lower. Port stocks have continued to fluctuate depending on the timing of large vessel arrivals. Stocks peaked mid-month at 6.3 Mt, but by the end of the month, they were down to 5.9 Mt. South African stocks showed the largest fall. Port prices have also continued to fluctuate during the month depending on levels of optimism in the market. They rose early in the month, following the silicomanganese futures price rise after the Chinese government’s stimulus announcement, but dropped back slightly as enthusiasm about the package faded. Overall, the 36-38% Mn ore price, FOT Tianjin, rose 4.1% m/m to RMB32.99 /dmtu, and 44% Mn grade increased by 3.2% m/m at RMB39.84 /dmtu. Ore demand outside of China has also been subdued with growing reports of cutbacks in ferroalloy production. This included a major Indian exporter. MOIL, the largest domestic Indian manganese miner, cut the price for 44% Mn ore by 3% for December deliveries but raised prices for all other grades by 3%, following the uptrend in the seaborne ore market.
FeSi.
Ferrosilicon prices slide amid weak demand. China’s domestic ferrosilicon market also suffered from weak steel demand during the month. Steel mills’ FeSi tender volumes and prices announced towards the end of the month were lower than expected. Additionally, strong output placed further pressure on FeSi prices in November. CRU prices for 75% and 72% FeSi, DAP, fell by 0.9% and 2.2%, respectively, m/m in November. Similarly, in the futures market, the most traded January ferrosilicon contract closed at RMB6,438 /t in early November, 1% lower than a month ago.
Chinese stainless steel production remained flat m/m at 3.3 Mt in November. Due to the weak stainless prices and poor profit margins, the increase in the monthly stainless production plan anticipated in early November did not materialize. According to the production plan, domestic stainless steel mills will have an increase in production in December. Although domestic HC FeCr output normally mirrors domestic stainless production, domestic HC FeCr smelters will be slower to respond, given the oversupply of HC FeCr already in the market.
CRU estimates that stainless steel production in the US and Europe will soften further in the final quarter of 2024. US production is forecast to be 429 kt, 11% lower than 2024 Q3. European production is expected to fall 8% to 1.4 Mt over the same period. In Europe, despite low-to-normal stock levels, a lack of confidence from the manufacturing sector, among others, has led to a weak demand period. This has weighed on the appetite of stainless producers to raise utilization rates. This has been highlighted by the falling production figures from the start of 2024 Q2. A seasonal uptick in demand in the US has been driven by energy-related industries benefitting from wider market conditions. Yet, this growth has come from a low base and has failed to be large enough to encourage any domestic stainless producers to raise utilization rates significantly.
Chinese crude steel output increased 6% m/m to 82 Mt in October, marking a growth of 4% y/y. The pickup in production is largely attributed to the stimulus package announced by the Chinese government in late September. Following September’s downturn, optimism surrounding the economy was somewhat reinstated, which led to increased buying activity early in the month of October. However, uncertainties around the fiscal measures of the stimulus later led to a slowdown in buying activity with a reduction in short-term purchases from mills. The stimulus measures announced were not industry- or steel-specific but rather focused on refinancing with local government. As a result, buyers became more cautious, and downstream buyers purchased stock only as needed. With production increasing in October, capacity utilization rates rose to 88% for BFs and 49% for EAFs on average across the month, with the last week of October edging up to 51% for EAFs as mills worked to stay on track with demand.
Spain-based stainless steel maker Acerinox has executed the sale of its shuttered Bahru plant in Johor Bahru, Malaysia, to Worldwide Stainless of Malaysia for $95 M (€90.4 M), the company said in a stock market filing. Acerinox stopped production at loss-making Bahru last May, six months after saying it was considering selling the mill. The group signed a sale-and-purchase agreement with Worldwide Stainless in October. At the time, Acerinox’s CEO, Bernardo Velázquez, said the deal was the best option for defending the interests of employees, customers, and the community in general. Bahru produced 77,181 t in 2023. In the United States, multi-metal distributor Russel Metals of Canada has closed its acquisition of Tampa Bay Steel, Florida, a transaction announced in November. Russel’s president and CEO, John Reid, said the company will continue to explore opportunities for growth in the southern US. Tampa Bay distributes carbon and stainless steel products as well as aluminum and other non-ferrous metals. It also offers a range of machining and fabrication services, such as precision processing, laser cutting, and computer numerical control (CNC) forming. Russel focuses on the same metal products, serving North America’s metals service centers, energy field stores, and steel distributor sectors.
Base Metals
Production will stop at Kidd Creek copper-zinc mine in Canada in 2026, as operating the world’s deepest base metal mine is proving too challenging, says owner Glencore. The end of extraction has been speculated about for years. In 2021, the global miner conducted a feasibility study costing C$80 M (US$57.0 M, €54.2 M) to look at a deep mine expansion, a project known as Mine 5. At that time, the mine’s life was expected to run out in 2023. “Results of the study showed that operating more than three kilometers deep would be challenging from a technical and economical point of view,” company spokesman Alexis Segal was quoted as saying by a local newspaper, Northern Life. The end of production in 2026 would mark the 60th anniversary of when Kidd Creek first went into production at Timmins, Ontario. It started as an open-pit mine before transitioning to underground operations. Extraction now takes place around 3,110 meters below the surface, and Kidd Creek has the world’s longest surface-to-bottom ramp, according to Switzerland-based Glencore, which says the mine produces an average of 40,000 t/y of copper and 70,000 t/y of zinc. According to CRU International, Kidd Creek last year turned out 24,770 t of copper, 40,960 t of zinc, and 40.43 t of by-product silver, giving a copper equivalent of 41,140 t. Following closure, reclamation works will start in 2027 and take years to complete, said Segal.
Vale’s base metals division has commissioned its US$2.94 bn (€2.80 bn) expansion project at Voisey’s Bay polymetallic mine in northern Labrador, Canada. Extraction will be underground instead of an open pit, as previously. A full ramp-up is scheduled to be achieved during H1 2026, when nickel-in-concentrate production will have increased to 45,000 t/y, copper to 20,000 t/y, and cobalt to 2,600 t/y. The mine began operations in 2005 and, with the completion of the expansion project, will continue to produce for many years to come, Brazil-based Vale said. Voisey’s Bay turned out 14,240 t of nickel, 10,200 t of copper, and 1,380 t of cobalt last year, according to CRU International.
Battery materials
During the assessment period from 29th November – 5th December, cobalt sulfate (CoS) prices were recorded within the RMB 26,000 – 27,000 /t range, unchanged from the previous assessment. Cobalt metal prices were recorded at RMB 167,000-190,000 /t, increasing by RMB 500 /t from last week’s assessment. This week, the CoS price remained flat amid a quiet market. As demand from ternary p/CAM production weakens further in December, the spot demand for CoS is now minimal, given the high integration level of the Co value chain. In addition, in the run-up to the year’s end, most p/CAM producers are now focusing on destocking for both feedstocks and their products, resulting in spot procurement of CoS almost halting. In addition, as the Co hydroxide price stabilized at $6 /lb, refiners’ profitability remains negative, resulting in a strong desire to increase prices. At the same time, buyers are still pushing for lower prices, given their bearish outlook for prices next year. As a result, the diverging price view of buyers and sellers has led to muted transactions, with the price staying flat in the spot market.
Prices driving plug-in hybrid resurgence. According to Woodmac, most of the demand growth is from PHEVs this year. The average prices of plug-in hybrids now match ICE equivalents. Because of this, the elimination of range anxiety and greater electric driving ranges have seen a resurgence in China plug-in hybrids this year. This has been important in supporting Co demand amid the slowdown in EV sales and the switch to low-cost LFP batteries. For cobalt, PHEVs are expected to be responsible for two-thirds of EV demand growth this year. In the mid-term, PHEVs may take market share from BEVs, but in the longer term, consumers are still expected to switch to BEVs.
