Four key takeaways from Fastmarkets’ Asian Ferro-alloys Conference 2024

Fastmarkets Asian Ferro-alloys Conference 2024 (AFA) took place in Hong Kong, China, on February 26-28, with discussions on the latest developments and the potential for the global market. Here we outline our four key takeaways from the event

1. Ferro-silicon supply outpacing demand in China

Oversupply and weak downstream demand for ferro-silicon in China was a recurring theme among delegates at the AFA conference.

Ferro-silicon is mainly used in the production of crude steel and to produce magnesium.

“[But], in 2023, the China ferro-silicon market was slightly oversupplied,” one delegate said.

According to China Iron & Steel Association (CISA), in 2023, total Chinese crude steel production amounted to 1.019 billion tonnes, practically unchanged from 2022.

But while 2022 ferro-silicon supplies in China amounted to approximately 5,970,000 tonnes, with demand at about 5,687,000 tonnes, in 2023, supplies declined to around 5,560,000 tonnes and demand fell to 5,460,000 tonnes, sources said.

“Despite the ferro-silicon supply in 2023 decreasing compared with 2022, demand [also fell],” a ferro-silicon source at the conference said.

And according to China Magnesium Association, the total magnesium production amounted to 740,700 tonnes in 2023, down by 18.4% from 876,989 tonnes in 2022. 

“Crude steel production in 2023 has witnessed little change compared with the previous year, but magnesium production has fallen by nearly 20%, so demand for ferro-silicon was naturally weaker,” a second ferro-silicon source said at the conference.

2. Emerging role for vanadium redox batteries

In terms of vanadium, delegates were less pessimistic because – despite four-fifths of all production currently going to the steel industry – the emerging market for vanadium redox batteries in energy storage systems could serve as a new demand driver for upstream vanadium raw materials. That would offset falling demand from the weak steel market resulting from sluggish activity in China’s real estate and infrastructure sectors, sources said. 

“Nearly 80% of vanadium supply is used in steel production, while vanadium redox batteries currently only consume 5% of total vanadium supplies,” a vanadium source told Fastmarkets on the sidelines of the conference.

“We have seen no improvement in downstream steel demand because the real estate and infrastructure industries remained weak [even after] stimulus measures were announced by the Chinese government to boost the home sales in 2023,” the source added.

Around 9,800-10,000 tonnes of vanadium pentoxide are needed to produce 1 GWh vanadium redox battery electrolyte, sources said.

In 2022, the EV Tank research institute, jointly released a White Paper on the development of China’s vanadium redox battery Industry with the Yiwei Institute of Economics, which predicted that the installed capacity of vanadium redox batteries will reach 2.3 GW in 2025 and 4.5 GW in 2030. 

It is predicted that, by 2030, demand for vanadium pentoxide in vanadium batteries will reach to around 100,000 tonnes – the same amount used in steel production in 2023, sources said.

“As more and more vanadium redox batteries are [used] in energy storage projects, it will certainly drive up demand for vanadium, but it may still take several years,” a second vanadium source said.

3. Reduction in ex-China ferro-chrome supplies

Ferro-chrome supplies in 2024 may face substantial reductions in most major global production hubs, such as South Africa, Turkey, India and Zimbabwe, due to an aggressive ramp-up in China, market participants to Fastmarkets on the sidelines at AFA.

In a keynote presentation at AFA on February 27, Yasar Özdirek, executive director of chrome sales & marketing at Turkish ferro-chrome producer Yildirim, told delegates that global high-carbon ferro-chrome production was 15.42 tonnes in 2023, slightly up from 15.35 million tonnes in 2022. 

But the additional output in 2023 all came from China, a ferro-chrome trader said, while the production in the rest of the world fell.

That trend is likely to be sustained through 2024 and 2025, the trader added – a view backed up by events in South Africa, where continuing logistics constraints and higher production and freight costs have forced ferro-chrome producers to cut output or reduce shipments, according to a leading ferro-chrome producer.

That sentiment was reflected in the latest production report from South African ferro-chrome producer Glencore.

Glencore produced 1.162 million tonnes of ferro-chrome in 2023, down by 22% from 2022’s 1.488 million tonnes, the company said in the report. And the company’s production guidance for 2024 is 1.100-1.200 million tonnes.

In Turkey, which is another key production hub for ferro-chrome, output has been capped by high production costs and an unstable shipping market.

And at the start of 2024, Yildirim announced that it would be cutting ferro-chrome production to “directly address the persistently high energy and raw material costs, declining demand and global commodity prices.”

In India, meanwhile, rising production cost and higher chrome ore prices have been forcing some local ferro-chrome smelters to cut or halt production, an Indian ferro-chrome producer at AFA told Fastmarkets.

“Only those smelters that have their own chrome ore mines can operate at a 40-50% capacity utilization rate,” the Indian smelter said.

And in Zimbabwe, the production of ferro-chrome is also facing challenges from competition with South African smelters.

“Our plant in Zimbabwe is halting production now,” a Chinese smelter said. “It is not profitable to produce ferro-chrome at the moment.”

And one of the country’s key producers, Zimasco, suspended operations at two of its furnaces in December 2023.

4. Manganese ore market sentiment improves

Sentiment among manganese ore market participants improved during the 2024 AFA conference, compared the bearish sentiment that dominated at AFA 2023 in Singapore.

Key factors affecting the manganese ore market include doubts over South Africa’s bulk logistics operations, questions over political stability in Gabon and rising ocean freight costs all added to the uncertainty over manganese ore shipments, despite the large volumes heading to China.

“At least South African manganese ore is still attractive,” a Chinese manganese ore buyer source said at the Hong Kong event.

Higher manganese alloy processing capacity in China, the potential growth of the market in India and the increasingly diversified uses of manganese in other industries, all added to confidence in terms of demand, sources said.

“We can also sense the demand growth for manganese ore in new energy and other emerging industries,” a miner source told Fastmarkets on the sidelines of the event.

But the scale of the manganese alloys market in China was a concern for AFA delegates.

“We have mining capacity and we have rail allocations,” another miner source said, “but we don’t know how much demand there is in China.”

Most of manganese ore participants said the Two Sessions meetings in China (on March 4 and 5) would hopefully provide the market with a clearer idea about China’s plans in terms of likely stimulus measures for 2024.

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