TELF AG Market Roundup 2023 Week 51
Macro & Energy
Gas: European gas prices fall on milder weather and stronger wind. Dutch and British wholesale gas prices fell on Monday morning on expectations of higher temperatures and wind generation, as well as steady liquefied natural gas (LNG) and Norwegian pipeline supplies. The contract for January at the Dutch TTF hub fell by 2.53 euros to 36.10 euros per megawatt-hour (MWh), its lowest level since October 6th. Average temperatures are expected to edge up this week, while wind generation is expected to increase over the next two days. Higher wind output typically reduces the demand for gas from power plants.
Oil: Brent crude steadied above $81/barrel, recovering from recent volatility, but faced pressure due to OPEC+ disagreements on output quotas. Prices dropped nearly 5% on Wednesday, rebounding as OPEC+ postponed its meeting amid disputes over quotas for African members. Analysts anticipated potential supply cut extensions before the delay. Robust non-OPEC supplies, highlighted by an 8.7 million barrel increase in US crude inventories (far exceeding the expected 1.16 million), also contributed to the pressure.
Chrome ore
UG2/MG Cr ore prices slightly dropped in the week ending December 12, signaling a reduction in overall spot activity compared to the previous week. Market participants noted persistent logistical challenges in South Africa, the primary production hub, hindering shipments and potentially impacting overall availability. Durban and Richards Bay ports experienced issues, causing prolonged delays and reports of Richards Bay accepting fewer trucks due to severe road congestion. Meanwhile, buyers in the market mostly reported stable Cr ore prices, signalling unchanged fundamentals overall.
Weekly data showed that the combined chrome ore inventories at major ports (Tianjin, Qinzhou, Lianyungang, and Shanghai) varied from 2.17 million to 2.46 million tonnes on December 11, compared to 2 million to 2.28 million tonnes collected on December 4. However, sources highlighted that the commercial availability of chrome ore at ports continued to be limited.
Imported charge chrome prices stayed steady despite robust competition from high output at smelters in northern China. Logistic challenges in South Africa also influenced this market. Turkish lumpy chrome ore prices held steady on Tuesday, with sources indicating a slight increase in spot activity during the week.
FeCr
Chinese FeCr prices rose as smelters increased offers on improved downstream demand and tightening supply. Due to persistent low market levels and increased winter power costs, FeCr output has recently been reduced to varying degrees in southern regions such as Sichuan, Guangxi, and Guizhou, leading to tighter spot supply.
Prices for EU HC 54-60% Cr decreased amid low demand. Slow demand and falling prices for other FeCr grades have added pressure on sellers to reduce their offers. Availability of alternative products has become scarce as non-European origin materials find a new destination.
Zimasco shuts two ferrochrome furnaces in ‘depressed’ market. Zimbabwe-focused ferrochrome producer Zimasco has suspended operations at two of its furnaces, the company confirmed this week. Zimasco, whose smelting operations are located at Kwekwe, halted production at two of its older furnaces, which have a total capacity of 72,000 tonnes per year, at the end of November. These furnaces were put under maintenance and will return to production “when the environment is conducive in terms of both the market and cost of production,” a company official said. Zimasco, which is part of China’s Sinosteel Corp, continues to operate two more modern furnaces with a total capacity of 86,000 tonnes per year. The company was on track to start two new furnaces, with the same combined capacity, in the coming months. The company said it had scaled back operations in response to “a depressed market.”
SMM data reveals China’s November 2023 high-carbon ferrochrome production fell slightly to 661,000 mt, down 3.71% MoM but up 25.48% YoY. Inner Mongolia produced 445,000 mt, up 1.14% MoM, while Sichuan production was 28,500 mt, down 35.96% MoM. Despite the weaker steel market and price drops, stainless steel production cuts were limited. Thus, ferrochrome demand reduction was also limited. In the south, losses led to some ferrochrome plants halting production, which, coupled with cost support, allowed ferrochrome retail prices to begin to recover. In the north, profitable retail prices kept production high. Thus, high northern operating rates meant that the overall decrease in the ferrochrome supply was limited. December’s high-carbon ferrochrome production in China is expected to hit 638,500 mt, down MoM. Yet, with stainless steel production starting to increase, ferrochrome demand is predicted to rebound. Despite lower ferrochrome bid prices from steel mills, lessened surplus expectations are easing ferrochrome producers’ pessimism. Sichuan’s dry season has begun, causing a sharp rise in electricity costs and leading to shutdowns among ferrochrome producers there and in other southern areas early in the month. Yet, the north’s increased capacity and stable output from large steel plants are keeping ferrochrome supply fluctuations minor.
Mn
The Chinese port Mn ore market was relatively stable this week as smelters have not begun holiday restocking. “Trade is not active this week as smelters are still in no hurry to buy ores,” one major trader said in Shanghai, adding the market mood was somewhat optimistic this week. “SiMn futures performance is better than last week, adding support to the spot market, and major ore traders are not willing to sell at low levels now,” he added.
China’s spot SiMn prices were unchanged as smelters held firm on offers in the face of lower tender prices. Hesteel’s tender price was lower than in November but higher than its initial bid level for this month. Market mood improved because of that small increase, as well as the recent recovery in SiMn futures prices.
FeSi.
Chinese ferrosilicon prices remained stable in the week to Wednesday, December 13, amid declining futures, bearish market sentiment, and more active Ferro silicon inquiries after the release of new steel mill tenders, sources told Fastmarkets.
Chinese major Baoshan Iron & Steel (Baosteel) announced it has conditionally agreed to buy a 48.6% stake in SD Steel Rizhao for RMB10.7 bn ($1.49 bn) from the Shandong Iron & Steel Group.
Global steelmaker ArcelorMittal has completed the disposal of ArcelorMittal Temirtau and ArcelorMittal Tubular Products Aktau in Kazakhstan to state-controlled direct investment fund QIC. The government entity is selling them to a local businessman.
Stainless and electrical steel producer Aperam says it is halting more than R$500 M ($101 M, €94.1 M) of planned capex because of a significant increase in imported steel, notably from China.
UK-based Liberty Steel has agreed to look into building an environmentally friendly iron production plant in Abu Dhabi. Meanwhile, it has firmed up plans to resume operations at an idled blast furnace in the Czech Republic.
SMM research shows China’s November 2023 stainless steel output at 3.0085 million mt, down 4.16% MoM but up 3.91% YoY. The 200 series production was 914,000 mt, down 6.97% MoM; the 300 series was 1.4485 million mt, down 1.56% MoM; and the 400 series was 646,000 mt, down 4.16% MoM. Meanwhile, Indonesia’s output was 405,000 mt, up 3.7% MoM and 35.29% YoY. The supply-demand imbalance for stainless steel eased a little in November thanks to October’s production cuts. But supply surplus weighed down stainless steel prices, which led to losses for mills, prompting year-end strategic maintenance and output reductions, especially in South China for the 200 and 300 series. Indonesian stainless steel plants boosted production, leveraging lower raw material costs and restarting semi-finished product lines like billets. While China’s November production fell, Indonesian stainless steel flowed into the Chinese market. Thus, the oversupply persisted. In summary, production resumption after maintenance and high Indonesian output indicate sustained ample supply.
Base Metals
Premiums for US nickel briquettes and cut cathode fell as sellers lowered premiums to offload inventory before year-end. The market outlook is negative as end-user demand remains weak and supply plentiful.
November 2023 saw national refined nickel output in China at 23,000 mt, down 3.9% MoM but up 54.45% YoY, marking the year’s first production drop. The decline since October is due to falling nickel prices, which squeezed profits for electrodeposited nickel producers using external raw materials, leading to losses by late October as prices fell to around 123,000 yuan/mt. This price is close to the production costs of some vertically integrated producers. Moreover, spot prices for nickel raw materials didn’t fall as fast as nickel futures, causing some enterprises to cut production due to cost pressures. December 2023’s estimated national refined nickel output is 23,200 mt, slightly up from November. Nickel prices show recovery signs after recent lows. Raw material supply may rise, while downstream demand will remain weak.
China’s copper cathode output in November was 960,800 mt, a decrease of 33,000 mt or 3.3% month-on-month but a growth of 6.8% year-on-year, according to SMM data. The output was 40,400 mt lower than the expected 1 million mt. The output totaled 10.44 million mt from January to November, an increase of 1.03 million mt or 10.93% year-on-year. Three smelters undertook planned maintenance in November, and one smelter reduced production due to equipment damage. A smelter began technological upgrading, and output at some smelters fell due to a tight supply of blister copper. Those unfavorable factors resulted in sharp declines in the output in November. In addition, the output of newly commissioned smelters was slower than expected, limiting new production, which was also one of the reasons why total production failed to increase. We believe that the average operating rate of the copper cathode industry fell 3.41 percentage points month on month to 88.92% in November.
Battery materials
Chinese cobalt metal prices began stabilizing amid a slight pick-up in activity on Tuesday after last week’s sharp price decline. Market participants said the low prices are attracting more buying interest; however, a trader said that few deals from industry buyers were actually settled.
Prices for EU Cobalt 99.8% Co increased slightly as aggressive offers tapered off for alloy grade material. While Chinese briquettes and cut cathodes are still at low levels, alloy grade prices keep trading at a large premium over standard grade.
November 2023 saw national nickel sulfate production in China at 36,100 mt in metal content and 164,300 mt in physical content, down 6.39% MoM and 14.77% YoY. The market faced a bearish trend, with year-end inventory reductions and weak demand for nickel sulfate. Some nickel salt firms’ slight inventory surplus in October led to reduced production in November, causing the production drop. December’s nickel sulfate market struggled due to reduced precursor company orders, lowering production schedules and demand. Nickel sulfate prices fell to historic lows, hurting manufacturers’ profits. Additionally, some factories scheduled maintenance. These factors suggest a continued production drop, with an expected 14.65% MoM decrease from November.
