ASIAN FERRO-ALLOYS CONF: Six likely key talking points at industry gathering in Hong Kong

Fastmarkets summarizes six hot topics that will likely dominate discussions during the 20th Asian Ferro-alloys Conference in Hong Kong on March 10-12.

What might weigh on the minor metals markets in 2019?
This year’s conference kicks off on Sunday March 10 with a minor metals briefing day, and no doubt participants in those respective markets will be eager to discuss whether stocks of metals such as indium, bismuth and antimony on the discredited Fanya Metal Exchange will eventually flow into the Chinese spot market this year.

The failed exchange’s warehouses hold stocks that are equivalent to around two years’ worth of Chinese bismuth supply and two months of Chinese antimony output. The warehouses also hold significant amounts of other minor metals stocks.

Despite failing to attract any bidders, an auction for 34.64 tonnes of Fanya’s indium stocks in January this year roiled an already sensitive market. Bearish sentiment has since seeped into other minor metals markets.

At the same time however, the perceived threat that a fresh round of environmental inspections across China later this year could interrupt the operations of domestic minor metals producers, thereby restricting output and potentially supporting prices, is another major talking point for minor metals participants at this year’s event.

Will vanadium prices return to their 2018 highs?
Vanadium prices in the Chinese and European markets both hit all-time highs last year, in part due to an expected increase in demand stemming from the implementation of new rebar standards in China, which came into effect on November 1, 2018.

The revised policy calls for domestic steelmakers to produce rebar with a set tensile strength, which can be achieved by adding ferro-alloys including ferro-vanadium.

But Chinese vanadium prices began to drop sharply late in 2018 when market participants realized that the enforcement of the revised rebar policy was not as stringent as had been expected. Prices stabilized at the start of 2019 and even started showing signs of strengthening in recent weeks due to renewed buying interest from domestic mills.

Fastmarkets’ assessment of the export price for ferro-vanadium, min 78%, fob China, hit an all-time high of $130-140 per kg on October 18 last year, up by 176% from $48-50 per kg on January 4. The price was most recently assessed at $74-76 per kg on February 28.

The price assessment for ferro-vanadium, 78%, free delivered duty paid, in Europe, reached an all-time high of $126-128 per kg on November 16, 2018, up by 165% from $46.50-49.50 per kg at the start of that year. The price was most recently assessed at $75-76 per kg on March 6.

Many market participants will be keen to find out whether vanadium prices might return to last year’s highs given that nationwide inspections on rebar quality are expected to take place this year, though no official guidance has been released as to when these inspections might take place.

What are the main drivers for the vanadium market in 2019?
As is the case for minor metals participants, the news of a fresh round of nationwide environmental protection inspections across China this year is likely to be a major talking point for noble alloy participants at this year’s conference as well.

Possible constraints on production, and therefore availability, in China could have significant upward pressure on prices for upstream vanadium products, which would then affect the profit margins of downstream consumers.

Chinese steel mills’ acceptance of a ferro-vanadium price largely depends on their profit margins. Typically, the more profit they make, the more likely they are more tolerate increases in raw materials prices.

If mills feel they can no longer make a healthy enough profit utilizing ferro-vanadium, they may be compelled to switch to alternative alloys. Indeed, in the months following the surge in vanadium prices in October and November 2018, Chinese mills had increasingly turned to more cost-effective alloys such as ferro-niobium as an alternative to ferro-vanadium.

Chinese imports of ferro-niobium hit a multi-year high of 35,909 tonnes in 2018, while shipments hit an all-time high for a single month of 7,010 tonnes in January this year, according to official but unconfirmed data seen by Fastmarkets.

How long will chrome ore’s price momentum last?
Chrome ore prices have risen steadily since the start of 2019 due to active restocking ahead of and after the week-long Chinese New Year holiday in early February, while currency moves have also provided some support.

Fastmarkets’ UG2 chrome ore index, 42%, cif China, at $172 per tonne on March 1, has risen by 11% since the start of the year.

Although market participants spoken to by Fastmarkets said they expect the price to continue to rise, just how long the uptrend will persist is a matter of debate, with many suggesting that the continued strength is largely dependent on whether major Chinese stainless steel mills raise their monthly ferro-chrome tender prices significantly in April.

Meanwhile, potential power restrictions in China’s autonomous region of Inner Mongolia in April and May this year could be a possible headwind for chrome ore prices in the country. The expected power restrictions could lead to production disruptions in the region, one of China’s major ferro-chrome production hubs, and thereby negatively affect spot buying interest for ore.

What factors might dominate the APT market in 2019?
Environmental inspections and trade tensions between China and the United States were two major factors that affected the ammonium paratungstate (APT) market in 2018 and participants expect that these two issues will continue to dominate the market this year.

Strict environmental inspections late in 2017 and mid-2018 prompted massive stockpiling early and during the summer of last year. But, most buyers have been comfortable on the sidelines since August; a lack of demand over the past eight months has put APT prices under persistent downward pressure.

The fob China APT price, min 88.5% WO3, averaged $295.25 per metric tonne unit (mtu) in July-December 2018, significantly lower than an average price $328.04 per mtu in the first half of that year, according to Fastmarkets’ historical price data.

The APT price in China maintained a steady footing at the start of the year after buyers and sellers both adopted a watch-and-wait strategy to see where the price would move against bearish a bearish backdrop in regard to macroeconomic and geopolitical uncertainties, such as China-US trade tensions.

But once buyers and traders returned to the market following the Chinese New Year holiday in early February, the APT price began to tick higher on firmer prices for raw materials, namely tungsten concentrate. As a result, the APT price in China has largely trended upward since February 27, with Fastmarkets most recently assessing the price at $265-277 per mtu on March 6.

How will manganese ores prices trend this year?
Manganese ore prices have largely been stable since the first quarter of 2018 at around $6-7 per dry metric tonne unit (dmtu) because of the market’s balanced fundamentals.

An increase in manganese ore supply last year has been offset by similarly healthy demand from the downstream ferro-alloys seactor in China as well as from silico-manganese and ferro-manganese smelters.

Silico-manganese supply has ramped up since the start of last year to meet China’s new policy on the technical qualities for domestically produced rebar, which was implemented in November 2018.

But uncertainty looms over the market’s performance for the rest of this year. Market participants have highlighted resistance from steel mills to pay higher prices for silico-manganese, prompting ferro-alloy smelters to cut their manganese ore purchases to maintain their own profitability.

Manganese ore prices usually follow alloy prices; with alloy prices dipping recently, manganese ores prices could go down the same route.

The 20th Asian Ferro-alloys Conference kicks off in Hong Kong on Sunday March 10. For more details about the event, please click here.