European Ferroalloys Price Insights - August 2022

In August a downward price trend prevailed on the European ferroalloys market. The main reason for that was seasonally reduced activity in the consumer sector. Thus, on the background of continuing macroeconomic uncertainty and growth of production costs, production of carbon steel is reduced.

According to worldsteel, global steel production totaled 149.3 million tonnes in July, down almost 7% YoY. As before, the biggest decline is observed in the CIS + Ukraine region - down 29.1% YoY. Steel output in Russia dropped by 13% due to Western sanctions against steelmakers and complicated exports. Ukraine lost at least two of its largest steel mills in Mariupol as a result of the Russian invasion, and the operation of the remaining plants is complicated by ongoing hostilities. EU steel production fell 6.7% YoY to 11.7 million tonnes, including a 2% decline in Germany to 3 million tonnes. In Asia, carbon steel production fell by 5%, mainly due to China, where the figure fell by 6.4%, to 81.4 million tonnes.

By late summer, ferroalloys producers, especially in Eastern Europe, began to be pressured by rising production costs, which was provoked by the unprecedented rise in electricity prices in the EU. In some countries of the region, electricity is now five times more expensive than it was a year ago.

Manganese and Silicon
  • Weak demand and an oversupply of imported alloy, which was shipped at the beginning of the year, caused a further decline in FeSi prices in Europe. The weighted average price index for ferrosilicon at Metalshub decreased by 12% in August.

  • A sharp rise in electricity prices put European producers in a difficult situation, with cost and selling price curves steadily converging. The Slovak OFZ has completely shut down its furnaces since August. 

  • Norwegian Elkem did not work for at least a week at the end of August, albeit due to an old man of the workers. For Norwegian plants, electricity costs are not as sensitive an issue as for plants in Central and Eastern Europe, which are much more dependent on imported hydrocarbons. 

  • Manganese metal prices fell only slightly in August, but a new round of price growth is likely in the near term. The Manganese Metal Manufacturers' Association in China called on Chinese manganese metal smelters to stop production for at least three months until the end of the year. According to sources, giants such as Tianyuan Manganese, Wuling Manganese and Southern Manganese have completely halted production in August.

Noble and Chromium alloys
  • According to a number of sources, trading companies in Europe now have excessive stocks of ferromolybdenum in their warehouses, leading to lower prices in the face of seasonally low demand.

  • Chromium alloy prices in Europe declined in August, according to data from Metalshub, but the situation may change soon. Samancor Chrome, the biggest global FeCr producer (2.4M mt of FeCr per year), may halt all operations for unknown period in the near future due to the forthcoming strike of the local union. Also, South African suppliers may face another logistic issue due to possible strike at Transnet, the country’s sole railway company.

  • In addition to seasonally weak demand, prices fell due to a sharp strengthening of the dollar against the euro, and noble alloys are traditionally quoted in US dollars in Europe. 

  • The seasonal decline in business activity in the European and U.S. markets and continued macroeconomic uncertainties are putting pressure on the nickel market. During the summer months, the weighted average premium to the exchange price of nickel briquettes halved again, as evidenced by the relevant Metalshub index. Thus, nickel prices have returned to pre-war levels. 

  • The question remains open as to whether the absence of the Russian metal at the European market will be a sufficient reason for the quotations to go up in autumn amid intensified business activity. 

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