Bulk alloy suppliers are reporting increased prompt demand from British consumers amid concerns about potential supply disruptions when the United Kingdom leaves the European Union.
Increased demand as a result of increased call-offs - consumers exercising their rights to material under existing contracts - as well as better spot demand, could lead to higher prices in the coming weeks, according to market sources.
The UK is scheduled to leave the EU on March 29 but has yet to secure approval from its own members of Parliament for a trade deal, prompting them to vote against leaving without a deal and to vote in favor of delaying Brexit.
Because no deal has been approved and a “no-deal Brexit” - the absence of a formal agreement on trade with the EU - is still possible, questions remain over how customs laws and duties will affect material flowing into the UK from the EU after Brexit, in addition to concerns about delays at the UK border.
Some British steel mills are afraid that they will struggle to secure enough material before Brexit and are trying to avoid potential disruptions by stocking up early.
‘In anticipation of a potential hard Brexit, customers are stocking up on ferro-chrome. We are seeing a sharp increase in call-offs. Consumers are not going to take the risk of not being able to run their plants because of Westminster,” a ferro-chrome supplier told Fastmarkets.
British consumers already pay a premium for ferro-chrome and other products because it is expensive for mainland European suppliers to ship there.
Suppliers are also less likely to keep buffer stocks in the UK due to the costs and logistics of shipping unused material back to the mainland.
“The UK is a premium market due to the freight differential. Suppliers don’t usually like to store material there because it is difficult to ship back out, so they charge a premium to ship to a UK warehouse and store it. This has not affected offer prices so far,” the ferro-chrome supplier said.
Fastmarkets’ price assessment for high carbon ferro-chrome, delivered in Europe edged up to $0.98-1.14 per lb on Friday March 15, from $0.97-1.15 per lb previously.
A second bulk alloy supplier said steel mills have also been increasing spot purchasing of silico-manganese.
“In the silico-manganese market, I’m seeing UK customers increase spot purchasing. I will say we will see prices going up for a limited amount of time and then they will return to normal,” the source said.
“People are worried about supply and fear that customs are not prepared to handle clearance after Brexit. It’s a bit like the Millennium effect; when we went into 2000 from 1999 people were concerned there was going to be chaos. I see this as similar; it is going to be complicated but I don’t see riots,” the supplier source added.
Fastmarkets’ price assessment for silico-manganese, delivered in Europe rose to €1,000-1,030 ($1,132-1,166) per tonne on March 15 from €980-1,030 per tonne previously.
steel mill source played down the situation but agreed he had heard that other mills were stocking up in fear of missing out on supply.
“There are mills stocking up but not us. No one has got a clue how Brexit is going to affect the market,” the source said.
“At the moment we are not worried, but you will get a totally different response from other mills. For us it’s not a big deal but for others it’s vital,” the source added.