ASIAN FERRO-ALLOYS CONF: Ten things we learned at 18th Asian Ferro-alloys conference

Here are ten things we learned at Metal Bulletin’s 18th Asia Ferro-alloys conference held in Hong Kong last week.

1. The opacity of the ferro-alloys markets makes securing finance from banks “a problem”, one market source said, because they are niche products that are not traded on any exchange. “Ferro-alloys are like oil in the 1980s – it’s an opaque market,” he added.

2. Nickel was a hot topic; the focus was on Indonesia lifting its export ban and a possible review of mine suspensions in the Philippines. Output from New Caledonia and Guatemala can replace some of the ore output lost from Indonesia and Philippines but tightness continues for now. In turn, high-grade NPI is tight due to reduced ore supply while stainless steel demand remains strong.

The nickel market is seen in a deficit in 2017, which should support LME prices. In the near term, demand will be strong from the battery, EV and new energy sectors.

3. Asian infrastructure demand will fuel steel demand, according to McKinsey & Co. "Fixed-asset investment is accelerating in this region," McKinsey partner Oliver Ramsbottom told delegates.

4. Although ferro-chrome production in the provinces of Sichuan, Shandong and Henan has fallen after environmental checks, a rise in Inner Mongolian output should offset this to some extent, domestic producers told Metal Bulletin on the sidelines of the conference.

Inner Mongolian ferro-chrome mills benefit from cheaper electricity costs and cheaper delivery charges to stainless mills in northern China as well as from rising spot ferro-chrome prices, one said.

5. Market participants expect ferro-chrome tender prices from Chinese stainless steel mills to rise in April from March because of tight supply, comparatively high Chinese stainless steel production and firm chrome ore prices.

“The price will surely go higher – the problem is how much Chinese stainless mills will lift the price,” an international trader said of the tender prices, which will be announced this or next week.

Metal Bulletin assessed the Chinese domestic high-carbon ferro-chrome, 6-8% C, basis 50% Cr, delivered, duty paid, spot price at 10,300-10,700 yuan per tonne on Friday March 24, up from 9,700-10,300 yuan a week earlier.

6. The chrome ore price may have peaked In January in this year on mining resumptions, according to a report from Metal Bulletin Research (MBR).

Given mining resumptions and expansions in South Africa and Turkey, chrome ore prices will come under continued pressure, MBR said.

Buoyant stainless steel output in China, low ore stocks in China and greater market consolidation in South Africa, however, will prevent a pricing collapse and slow the downward trend in the coming quarter, it added.

Still, MBR sees chrome ore prices retreating from existing levels in the coming months, with further declines expected in the second half due to increased supply.

Chrome ore, South Africa UG02, met grade, basis 42%, cif main Chinese ports stood at $390-400 per tonne throughout January, according to Metal Bulletin’s assessment.

On Friday March 24, Metal Bulletin’s chrome ore South Africa UG2 concentrates index, basis 42% cif China, stood at $370 per tonne.

As of March 10, Metal Bulletin changed its UG02 chrome ore assessment price to a weekly basis chrome ore concentrates index updated every Friday to reflect the recent increase in liquidity.

7. Total ferro-alloys capacity in India has hit about 5.15 million tpy. The country mainly produces manganese alloys including ferro-manganese and silico-manganese; ferro-chrome; ferro-silicon; and noble alloys, Jindal Stainless Steel director Nirmal C Mathur said.

Indian steel production increased 7% in 2016 but manganese alloys production and export volume dropped 1% and 22% year-on-year respectively due to trade cases in North America and Europe and rising production costs, according to the International Manganese Institute (IMnI). Higher power prices in fiscal 2017-2018 in Andhra Pradesh state may force smelters to cut production or shut down.

8. The recent volatility in China’s silico-manganese futures, listed on the Zhengzhou Commodity Exchange, is being closely watched.

9. Manganese ore demand increased by 2% last year to 47 million wet tonnes on rising manganese alloys production, especially in China, according to IMnI. The ore market rebalanced in 2016 on widespread production cuts, especially in Africa and Australia, and rising demand, especially in Asia.

Manganese ore supply contracted for a second consecutive year in 2016, falling 7% to 44.8 million wet tonnes. Many mines that closed in 2015 remained shuttered last year.

Around 3 million tpy of extra capacity is expected to come on line at new manganese ore projects by 2020 as well as 580,000 tpy of sinter. Although the extra capacity only partially offsets about 8 million tpy lost through mine closures in 2015-2016, some idled mines could restart if prices increase, IMnI market research manager Aloys d’Harambure said.

10. Nickel prices could come under pressure if stainless steel production slips and if the easing of Indonesia’s nickel ore ban releases more material onto the market, Chinese independent chrome market consultant Jacky Han suggested.

Restocking of chrome ores will lift prices this year while domestic ferro-chrome output remains at current levels. China produced 4.23 million tonnes of ferro-chrome in 2016, up 13% from 2015.

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