European Ferroalloys Price Insights - July 2022
There were no noticeable price fluctuations in July in the global and European ferroalloys markets. This is primarily due to the traditional lull and reduced business activity during the summer holiday period.
The near-term outlook for the ferroalloys market in Europe looks rather dim. On the one hand, according to EUROFER estimates, real steel consumption in Europe will decline by 1.1% in Q3. And given that the steel market is now in surplus, the decline in apparent consumption in Q3 is estimated at 2%. Obviously, this will be reflected by a reduction in steelmaking and ferroalloy consumption. However, in the region's largest economy, Germany, the situation looks slightly more encouraging. The volume of building approvals in May practically stopped falling year-on-year and even rose by April. What about new constructions, the year-on-year figure has been rising for two months in a row. The automotive industry has shown a relatively stable output figure and with a dip in car output in the second half of 2021 and the current devaluation of euro, an increase in car production is to be expected.
On the other hand, the sword of Damocles is still hanging over European steelmakers, with rising prices for raw materials, primarily energy. The ongoing war in Ukraine and new sanctions against the aggressor country, Russia, are fuelling concerns among European businesses both about the security of raw material supplies and their potential cost.
The record devaluation of the euro (the European currency hit a 20-year low against the US dollar in mid-July), on the one hand, is stimulating growth in domestic steel production. At the same time, the weak euro is pushing the price tag of imported fuel up even further.
Manganese and Silicon
After falling in price by €300/mt at the beginning of the month, ferrosilicon in Europe remained almost unchanged during July, according to the weighted average index on Metalshub. Despite difficulties with Ukrainian FeSi supply (Ukraine used to cover up to a third of the alloy's imports to Europe before the war), there is no supply shortage in the regional market. Market participants report large enough stocks of Egyptian, Indian, and Brazilian material, which, however, is inferior to European and Ukrainian one in quality. As we know ferrosilicon is one of the most energy-consuming types of ferroalloys, therefore its producers are most sensitive to fluctuations in electricity prices. Thus, the Slovak OFZ plant announced a complete cessation of production. According to the company's management, electricity alone to produce a tonne of FeSi requires as much money as can be earned on the market by selling that tonne.
Weighted average price indices for silicomanganese, ferromanganese, and manganese metal on Metalshub fluctuated slightly in July. Considering lower trading activity and higher energy costs, we should not expect significant price changes for bulk manganese alloys soon. On the manganese metal market, in turn, appreciation is not ruled out. Association of China's Ferroalloy Producers is calling for a 60% cut in production of manganese alloys. By doing so, the association plans to put pressure on suppliers of raw materials and provoke a significant drop in the price of manganese ore.
Noble and Chromium alloys
Being fully dependent on imported supplies, the European ferrochrome market felt the full negative impact of the euro devaluation in July. Despite seasonally weaker demand, the weighted average price index for high-carbon ferrochrome on Metalshub rose by 14%.
The ferrovanadium price index fell by 8% in July amid weak demand. However, a moderate rise in alloy prices should be expected in the near term amid the devaluation of the euro. Towards the end of July, the seasonal lull has also impacted demand for ferromolybdenum in Europe. The weighted average FeMo price index on Metalshub fell by more than 10%.
The premium for nickel briquettes in Europe, as indicated by the corresponding price index on Metalshub, fell by 9% on a weekly basis during the month. As a result, the nickel depreciation seen since May ended with the price tag returning to its prewar level of mid-February.
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