European Ferroalloys Price Insights - May 2022

In May the global and European ferroalloys market was characterised by quite a noticeable decline in prices. The main reason was a further drop in consumption on the back of lower steelmaking and a rise in ferroalloys stocks. The only exception was the chrome alloys market in the EU, where the lion's share of imports, covered by supplies from Russia, remains in question due to sanctions against Russian businesses.

Market Insights

The rapid appreciation of many ferroalloys in March-April, triggered by fears of shortages due to discontinued supplies from Ukraine and Russia, appears to have exhausted itself. In some segments, there has been an increase in supply from alternative regions, but in most markets, consumers have been extremely inactive, so by and large the ferroalloy markets have entered the traditional summer lull a month earlier than usual. 

The global carbon steel production fell by 7.1% YoY in the first 4 months of 2022. The drop was 6.8% over January-March, so the decline is accelerating. China's steel production decline stayed at 10% YoY, EU's one fell by 4.7%, compared to 3.8% for January-March. Meanwhile, India shows a 6.5% growth in 4 months of 2022, vs. 5.9% growth in Q1. Domestic steel consumption is the main driver of that. 

Manganese and Silicon

Low consumption due to reduced steel production forced manganese alloy suppliers in Europe to make significant concessions. The significant decline in demand in the segment was also confirmed by a record number of offers for ferromanganese and silicomanganese in large customer tenders with shipments due in July. The weighted average price index for HC FeMn on Metalshub fell by 25% in May, with SiMn quotations shedding 30%. 

In the short term, some reduction in world market supply is likely. Increasing domestic ferroalloy consumption in India is likely to reduce export volumes. India is one of the top three exporters of ferroalloys in the world, and in terms of manganese alloys, it is the largest supplier. 

On the other hand, the Ukrainian government has announced plans to modernise the railways in the west of the country to reorient exports (including ferroalloys) from seaports blocked during the Russian military invasion to rail shipments. However, the effect of this in the form of increased supplies of Ukrainian alloys to the EU is only possible in the rather distant future.

The weighted average ferrosilicon price index on Metalshub fell by 30% in May. Low demand and increased supply from Brazil and the Middle East, instead of reduced supplies from Ukraine, caused the segment to be overstocked and prices to pull back. 

Nevertheless, further price declines look unlikely. Even with the seasonal decline in demand in summer, the cost of FeSi production will only rise on the back of rising energy costs. 

In the European manganese metal market, there were no noticeable price fluctuations in May, with the Metalshub price index for manganese metal flakes remaining unchanged. 

However, manganese ore prices in China reached a local buttom in mid-May, after which consumers started to restock, and prices began to recover amid low imports. Imported manganese ore prices in China increased by 3.4%, while inventories at ports decreased by 9%. This could lead to higher prices for manganese metal soon.

Noble and Chromium alloys

The demand for ferroalloys used in the production of stainless and special steel will decline. According to the ISSF forecast published in May, stainless steel consumption growth will decline significantly. In Europe, stainless steel consumption in 2021 increased by 16-36% depending on the products. At the same time, for 2022 the forecasts are very conservative from 1.5% to 3.4%.

So far, however, stainless steel output, including the 300 series, is rising, which is supporting ferrochrome prices in Europe. In May, the weighted average HC FeCr price index on Metalshub rolled back by 14%, but before that, it had doubled from January to April.

LC FeCr, on the other hand, continued to rise - the Metalshub index rose by 35% in May. The fundamental factor is that Russia is the largest exporter of LC FeCr in the world. Due to sanctions, the country is seeking to redirect the maximum amount of raw materials from Western countries to Asian countries, thereby intensifying a shortage in the European market.  

European ferromolybdenum prices stabilised in May, with the Metalshub index recording only slight downward deviations from April levels. Ferrovanadium, on the other hand, continued to fall in price amid weak demand.

The speculative rise in nickel prices that started at the end of February finally collapsed. Against the backdrop of weak demand in China and negative market expectations in Europe, the metal became cheaper in May. The average premium to the exchange price of nickel briquettes on Metalshub has almost halved. Nevertheless, the premium remains at least twice as high as at the beginning of the year.

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