Five ways the coronavirus is affecting the minors, ores and alloys markets
The spread of the novel coronavirus (2019-nCoV) outside China has brought with it logistical restrictions, a reconsideration of raw material requirements and concerns over possible disruptions to supply in the coming weeks.
Here are five things under consideration by the minor metals and ferro-alloys markets while the situation develops.
Adjustments to delivery and payment terms to mitigate risk
Trading companies have been adjusting their delivery and payment terms in light of uncertainty caused by the coronavirus.
“With a different steel mill closing every day, we have stopped selling material on a delivered basis to ease off any additional risks, and have been selling on an FCA or ex-works basis instead,” a trader in Europe said.
Traders have also been concerned about giving out payment terms to customers with some only accepting cash in advance amid growing fears about the impact the coronavirus pandemic will have on businesses around Europe.
“We’re not sure what is going to happen in 30 days and whether our clients will have any cash flow at that point or not,” a second trader in Europe said.
“I’m hesitant to sell my material forward. If I can, I’m getting rid of everything right now,” another trader said.
The potential impact of logistical constraints
Impending and already-enforced border closures in parts of Europe are restricting deliveries, and multiple sources say their material has been subject to delays due to lengthy border queues, truck checks, and or prioritization of different products. One trader reported a delivery of cobalt was being held up at a border in Central Europe ahead of restrictions coming into place on the transport of non-essential goods.
“Everything is slowing down - the problem is not price, the problem is logistics. The question is: can you guarantee delivery?” a ferro-chrome producer said.
The likelihood of near-term price support
Spot trade has slowed in most minor metals and ferro-alloys markets, with steel mills mulling their own production and uncertain about their raw material requirements. Uncertainty means prices have largely come under pressure, but purchases are also being left to the last minute until buyers are certain of their needs, and transport delays could mean prices are somewhat underpinned.
“The only inquiries we are getting are for last-minute delivery, which is basically impossible now,” a cobalt trader source said.
“There’s no competition because borders are closing and not many [sellers] have material on the ground. If you have material on the ground in Italy, you can ask any price you want,” a ferro-alloys trader corroborated.
The force majeure declaration came in response to severe disruptions to operations amid measures taken by authorities and the company itself to mitigate the impact of the virus, according to correspondence sent to suppliers.
The production cuts are aimed at maintaining employee wellbeing and keeping production aligned with demand, the company said.
Market sources said they expect similar declarations of force majeure across the steel raw materials industry.
Possible threat to the South African mining industry
There are growing concerns about the potential impact of the virus on South African ore and ferro-alloys supply.
No logistics or supply disruptions have been reported so far but experts acknowledge there is a risk of mass disruption and price volatility if the virus spreads among the country’s mining workforce.
Transnet, the country’s state transport operator has implemented measures including screening vessels, educating employees, and placing an embargo on work-related travel.
The country’s Minerals Council has formulated an action plan that covers improvements to workplace hygiene, consultations on standards and protocols for quarantine, and restrictions on non-essential travel.
It is also encouraging routine flu vaccinations to reduce the risk of workers having already compromised immune systems and said it will intensify screening for HIV and tuberculosis to help identify the most at-risk workers.