TELF AG Market Roundup 2023 Week 37
Macro
Gas: European natural gas futures surged by as much as 8% to €35.5 per megawatt-hour on Friday as union talks broke down and partial strikes at two Chevron facilities in Australia began. These two liquefied natural gas facilities account for over 5% of the global supply, primarily serving Asia. The strikes could disrupt operations and lead to a decrease in LNG supply, especially if they are prolonged. As of now, demand in Europe remains subdued, and fuel reserves are approximately 93% full, marking the highest levels ever recorded for this time of year. This surpasses the European Union’s objective of achieving such storage levels by November 1st. However, LNG demand in Asia is expected to increase as countries prepare for the peak winter season. Current European gas prices remain around 50% higher than pre-invasion long-term averages, which continues to hurt households and industry, particularly Germany’s automotive and petrochemical industries. Concerns grow that energy-intensive industries may relocate if prices do not settle, leading to de-industrialization.
Oil: The benchmark oil price settled largely unchanged on Monday, holding above the $90 a barrel reached last week for the first time in 10 months following fresh Saudi and Russian crude output cuts. Brent crude settled down 1 cent to $90.64 a barrel, while U.S. West Texas Intermediate crude settled down 22 cents to $87.29. Saudi Arabia and Russia last week announced that they will extend voluntary supply cuts of a combined 1.3 million barrels per day (bpd) until the end of the year. The supply cuts overshadowed continuing concern over Chinese economic activity. On Monday, U.S. Deputy Treasury Secretary Wally Adeyemo said that China’s economic problems were more likely to have a local impact than affect the United States. Much of this reduced supply has simply served to offset a major slowdown in global oil demand. U.S. crude inventories are expected to fall for the fifth week in a row by about 2 million barrels; a preliminary Reuters poll showed on Monday. Crude supply could also see fresh disruption from powerful storms and floods in eastern Libya, in which more than 2,000 people have died and which has forced the closure of four major oil export ports since Saturday – Ras Lanuf, Zueitina, Brega, and Es Sidra.
Freight: The Baltic Dry Index fell on Tuesday as the Baltic Capesize Index hit a nearly six-month low, offsetting the impact of a rise in the Baltic Panamax Index. The Baltic Dry Index fell 20 points, or 1.8%, to 1,063, its worst performance in more than a month. The Baltic Capesize Index fell 75 points, or 7.0%, to 997 points. Capesize daily profits decreased by $621 to $8,266. The Baltic Panamax Index rose 3 points to 1,481 points. Panamax daily profits increased by $21 to $13,326. The Supramax index rose 13 points, or 1.3%, to 1,008.
Chrome ore
Prices for chrome ore substantially increased this week as logistics issues continue to affect shipments to China. Richards Bay is heavily congested following the breakdown of the ship loader on berth 801, and subsequently, vessels have to be redirected to other berths or ports for loading.
Turkish 48% Cr ore prices edged up this week as Chinese ferrochrome production remains robust. Market participants reported that prices are stabilizing now, but there is still a buying appetite, and prices are expected to hold firm in the near term. Cr ore stocks at Chinese ports hover around 2 million tonnes, but the strong FeCr production levels require constant replenishment.
FeCr
• Ferro-chrome prices in the Chinese spot market remained stable, with continued high-capacity utilization rates among smelters. Imported charge chrome prices edged higher, with the emergence of some spot activity, but buying interest from Chinese STS mills was limited, considering the ample availability of domestically produced material. Sources in the alloy market reported the Chinese currency’s fluctuation against the dollar may have had some effect because it may have created additional risk associated with buying in dollars.
• HC ferrochrome in Europe prices rose further during the week, with reports that demand had increased while more market participants returned from summer absences. Higher grade (65-70% Cr content) material markedly increased, with a resurgence of spot deals while restocking began. The latest move put prices above $2 per lb Cr for the first time since June 20, with sources on the sell side reporting a relatively bullish attitude toward demand in the coming weeks. Lower grade (60-64.9% Cr content) prices also edged higher during the week, albeit less markedly, with continuing support from reports of tight supplies of Cr ore domestically in India, a key production hub for this material. At the same time, however, there was also some suggestion that alloy availability may have increased in India, with reports of more production entering the market despite tight ore supply, which could temper some of the upside from recent weeks.
• The US HC FeCr market declined during the week ended August 31, with weak spot demand and lower prices in overseas markets forcing prices down. US HC FeCr prices have been at a premium in the global market, but lower-priced material imported to the US has created a more competitive price environment. In addition to weaker global prices, a lack of consistent spot demand has also weighed on prices during the slower summer months. Market participants suspect activity levels will remain subdued over the near term.
Mn
• Chinese SiMn mills increased tender prices this week, fueling bullish near-term price settlement in the market. Spot trade volumes were low ahead of the settlement of major mills’ tender results, but smelters were unwilling to reduce offer prices. The tender level was higher than the initial market expectation due to the recent strong futures market.
• Chinese port Mn ore prices increased this week, with traders raising offers on higher alloy tenders and improved sales performance. Some participants were restocking ahead of the upcoming Mid-Autumn Festival and National Day holiday, a trader said. Recent increases in SiMn prices boosted participants’ outlook on Mn ore, and sources expect the ore price to hold strong in the near term.
• Spot prices for both domestic and exported Indian Mn alloys increased this week as trading picked up after the monsoon break. Upward price momentum has built heading into September due to both increased demand and reduced material availability.
FeSi.
• Chinese ferrosilicon production increased month on month in August while prices were mixed. As with other alloys, increased smelter margins also led to an increase in ferrosilicon production. China produced a total of 450,000t ferrosilicon in August, up 7% on the month. This was the highest production level since April and the largest month-to-month production increase so far this year. The 75% Si DAP price moved up on renewed demand and a bullish market outlook, while the 72% Si DAP price held firm.
• China’s domestic stainless-steel prices picked up over the week ended Wednesday, September 6, due to increased activity in the domestic property market and a rise in nickel futures, sources said. Big cities in China announced the lifting of some restrictions on housing transactions late in the week prior. According to the new regulations released by local governments, even if a family already has a mortgage loan, individual family members may still considered first-time home buyers, provided there are no homes registered in his or her name. The policy change stimulated buying interest activity in the property markets of the country’s first-tier cities, such as Beijing and Shanghai. The stronger property market in the big cities led to bullish sentiment in the steel market, including that of stainless steel. Nickel prices rose over the week to Wednesday due to concerns over a potential Indonesian mining suspension, which also supported stainless steel prices, sources told Fastmarkets.
• According to an SMM survey, stainless steel output totaled 3.217 million mt in August, up 1.66% MoM and 41.18% YoY. The output of 200-series stainless steel was up 1.7% MoM to 956,000 mt, 300-series increased by 3.28% MoM to 1.678 million mt, and 400-series trended up 0.74% MoM to 583,000 mt. A slack season was extended into early August, and purchases aimed to meet rigid replenishing demand. Delayed issuance of nickel ore quotas and support from raw materials led to booming stainless steel market activity, and stainless-steel prices mounted sharply to a high level. Overall, September may see high production schedules and high capacity expansion. Steel mills and traders will be upbeat about downstream demand in a peak season. Some steel mills in East China will continue to increase production of 300 series in September, seeking directions from robust demand. Social inventory witnessed moderate demand in August but will shrink amid tight production schedules and normal delivery for stainless steel. Demand will remain better than in previous years. Furthermore, a large steel mill in East China continued to stop selling and limit prices, which appeared bullish for the market outlook. Stainless steel production is expected to increase significantly in September.
Base Metals
• Copper recouped some losses on Monday morning, having been under pressure in recent weeks. The contract is down 5.3% from the start of August at 8 366$ per tonne. Last week’s decreases were due to concerns over China’s economic recovery. Copper is falling amid renewed fears of weak demand in China. Although copper is under pressure from Chinese macroeconomic factors, with seasonality set to strengthen in the fourth quarter, the anticipation of further economic stimuli from China, and overextended negative speculative positioning, upside price risks remain, as reported by Fastmarkets.
• Copper inventories in the domestic China bonded zone increased by 1,700 MT from the previous week to 51,000 mt as of Friday, September 8. Premiums in the domestic spot markets plunged this week and stood at near zero on Friday. Import profit turned into losses, suppressing trading of imported copper under warrants, which translated into reduced shipments from bonded zone inventories. Copper inventories in the domestic bonded warehouses are expected to grow slightly next week. Most of the cargoes expected to arrive ahead of the National Day holidays have been booked by the market, limiting arriving shipments. Meanwhile, shipments from bonded zone inventories are unlikely to increase due to the closure of the import window.
• China’s copper cathode output in August was 989,000 mt, an increase of 63,100 mt or 6.8% month-on-month and a growth of 15.5% year-on-year. The output increased by 2,900 mt compared with the expected 986,100 mt. The output totaled 7.47 million mt from January to August, an increase of 771,800 mt or 11.52% year on year.
• Nickel. Much the same as copper, nickel is still down by 8.7% since the start of August despite Monday morning’s gains. Nickel is getting no relief from the glut of Indonesian nickel, sluggish stainless [steel] demand, and weakening growth in [electric vehicle] sales
• Owing to a continuous rise in output of a smelter in northwest China and a smelter in East China, Chinese refined nickel output totaled 21,800 mt in August, up 0.93% MoM and 40.65% YoY, in line with expectations. The refined nickel output may total 23,000 mt in September, up 0.55% MoM and 49.35% YoY, hinging on the persistently elevated output of a smelter in northwest China and the full capacity of refined nickel units of a smelter in North China. Overall, refined nickel output is expected to keep hiking in 2023.
Battery materials
• Chinese nickel sulfate output in August stood at 42,000 mt in metal content or 193,000 mt in physical content, up 5.12% on the month and 30.5% on the year. In August, ternary cathode precursors increased by about 4% compared with July. The increase in nickel sulfate production in August was largely pinned on the increase in precursor production of integrated large factories. In addition, the output of small factories remained stable compared with the previous month. Therefore, the overall nickel sulfate production edged down in August. At the same time, nickel sulfate output may inch lower by 5% in September, mainly due to rigid demand from precursor markets and weaker demand from the refined nickel market. Prolonged nickel sulfate price erosions and high costs in early August had non-integrated salt plants running in the red, thereby leading to production cutbacks of some salt plants.
• In August, the production of cobalt sulfate in China was 7,402 mt in metal content, representing a 12% decrease MoM and a 15% increase YoY. From January to August, the cumulative production of cobalt sulfate in China reached 57,085 mt in metal content, with a growth of 18% YoY. On the supply side, the downward trend in cobalt sulfate prices in August led to higher intermediate costs for raw material cobalt salt producers. Additionally, downstream purchasing demand has been weak since mid to late July, resulting in an overall decline in operating rates. Some companies have converted their cobalt sulfate production lines to produce cobalt chloride due to the higher metal price premium of cobalt chloride compared to cobalt sulfate. Recycling companies have faced difficulties in recovering black powder and maintaining high coefficients, leading to a decrease in production. On the demand side, the production of ternary precursors increased in August. However, major integrated precursor manufacturers rely mostly on self-supplied cobalt salts, resulting in weaker external demand. The downstream market has shown cautious sentiment, focusing on digesting previous inventories.
• It is estimated that in September, on the demand side, the overall production of ternary precursors will decrease, leading to a decline in cobalt demand. On the supply side, integrated enterprises will see a decrease in operating rates due to weakened downstream demand. Production from smelters will decline due to difficulties in black powder recovery and temporary mismatches in intermediate products. Additionally, the Hangzhou Asian Games may have an impact on cobalt salt production in the Zhejiang region. The expected production of cobalt sulfate in September is 7,015 mt in metal content, representing a 5% decrease MoM and a 3% increase YoY.
