ASIAN FERRO-ALLOYS CONF: Ten key things we learned at the annual event

Metal Bulletin has gathered some of the major talking points from its 19th Asian Ferro-Alloys conference in Hong Kong on March 20-22.

1. Demand for steel and ferro-alloys will come from India, Russia, OBOR and Southeast Asia
“From my point of view, market means population. China [has a population of] 1.4 billion people,” Mark Shujun Ma, chairman and chief executive officer of metals technology and manufacturing corporation CIMM Group, said, adding that India has a similarly strong population. India’s large population with 50% below 25 years of age makes the South Asian country the next growth market after China, followed by Russia, according to Ma.

“After China’s demand boost early this century, we are running out of steam and expect stable growth,” GF Futures senior sales trader Max Shih said. “Southeast Asia looks good but demand can’t be as good as China as the population is not so high, so the top pick on economic growth, population and population growth is India - it is also going through a wave of urbanization and industrialization.”

Meanwhile, the One Belt, One Road initiative will mean construction of highways, railways and new infrastructure including houses, making it another market that will consume high volumes of steel, Metal Bulletin heard at the conference.

2. China’s steel production will fall in 2018
“Steel production from China will fall to 750 million tonnes in 2018 with a stable outlook for producers elsewhere [in the world],” Metal Bulletin analyst Shruti Salwan said. Crude steel production was 831.7 million tonnes in 2017.

China plans to cut crude steel capacity by 30 million tonnes per year in 2018. By the end of August 2017, the country had already met its target of eliminating 50 million tpy of crude steel capacity. This follows a capacity reduction of 65 million tpy in 2016, meaning that the country has eliminated 76.7% of its targeted 150 million tpy of capacity cuts for the 2016-2020 period.

3. Chrome prices will be pressured down by stainless steel markets and stock levels in China
“Chinese buyers say [chrome ore] prices have to drop in China as stocks are now around 2.7 million tonnes,” a large chrome trader said. Metal Bulletin’s UG2 chrome index cif China dropped to $241 per tonne on Friday March 23 from $244 per tonne the week before.

4. Nickel demand is healthy and in a deficit, EV remains a hot topic
“Prices on the LME will range $13,000-14,000 per tonne for nickel in this year,” a producer told Metal Bulletin on the sidelines of the conference. “Nickel was, is and will be in deficit. Ferro-nickel is in short supply and hence premiums have been going up. Stainless steel remains the key driver for nickel but the [electric vehicle] story is a hot topic.” The producer added that more capacity will be transferred to making nickel sulfate and battery raw materials in the medium term.

Business consultancy McKinsey said in November 2017 that global annual EV production is expected to reach 31 million vehicles by 2025, which will drive demand for class 1 nickel supply for battery production. Demand for high-purity class 1 nickel may increase to 570,000 tpy by 2025 from 33,000 tonnes in 2017, according to McKinsey.

5. Metal Bulletin asked delegates on their views of manganese, chrome and vanadium markets
Check out delegates’ responses on where they expect the second-quarter European ferro-chrome benchmark to settle and what has driven vanadium prices this year.

6. The significance of China’s low manganese ore inventory
Chinese market participants attributed the low inventories to the lower manganese content in ores, good profits in manganese ore trading in 2017 and more buying interest in overseas seaborne ores markets, due to soaring domestic manganese ore prices. Also, lower quality manganese ore in 2017 has meant silico-manganese production consumed more manganese ore imports.

Meanwhile, manganese ore imports surged to 2.1 million tonnes in January 2018, almost double the 1.1 million tonnes imported a year prior, according to Chinese customs data, indicating that demand for manganese ore is strong.

7. Manganese prices ‘unlikely to change until Q3'
Buying from Chinese manganese smelters might slow down but strong market fundamentals will support manganese prices, participants said during a panel discussion at the conference. The general consensus during the panel discussion was that, although current high prices for manganese ore might slow down procurement on the smelter side, deals will still be made.

8. Strict environmental controls maintain sway over ferro-alloys prices
China’s stricter regime of environmental controls was one of the key factors influencing fundamentals and prices in the Chinese ferro-alloys markets in 2017, and these controls will continue to affect supply and prices this year.

Unexpected environmental inspections in Hunan and Guizhou provinces in southern China in mid-December resulted in tight supply of ferro-chrome, and were one of major reasons for higher ferro-chrome monthly tender prices from stainless steel mills in the first quarter of 2018.

In silico-manganese, some manganese alloy smelters were ordered to cut production for one month in Ningxia province, China’s production hub for silico-manganese, beginning in early December. This triggered a big rally in the most-traded futures contract for silico-manganese on the Zhengzhou Commodities Exchange (ZCE), and spot silico-manganese prices followed sharply up.

9. NPI production halt in Huade County will have limited effect on prices
An order enforcing a halt to nickel pig iron (NPI) production in Huade County in central Inner Mongolia over the past two weeks is unlikely to have a significant impact on prices for the material given the region’s relatively small capacity compared with the rest of China, Metal Bulletin learned.

10. Ferro-silicon prices expected to stabilize in H2 2018
Falling ferro-silicon prices have been a major point of concern since the beginning of this year, but the market will correct itself soon, according to the general manager of Beijing LY Metals and Mining. “There has been stable demand from countries such as Japan and South Korea, which imported more ferro-silicon in 2017 than 2016, and this will likely continue in 2018,” Lucy Wang said on the sidelines of a ferro-silicon roundtable.

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