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The rise of green development concepts, plus support from local governments and demand from downstream steelmakers, mean that Chinese ferro-alloy smelters will strengthen their green production efforts in 2024. This, in turn, will enhance the competitiveness of producers and also guide a restructuring of the industry, sector sources have told Fastmarkets.
The ferro-alloys industry is energy-intensive so it is a key focus for government-driven green development plans.
In 2022 and 2023, various Chinese government departments and the domestic ferro-alloys industry association launched a series of guides on energy savings and carbon emission reductions, as well as requiring strict certifications for green ferro-alloys smelters and end-products.
The move has gradually drawn the attention of Chinese ferro-alloys smelters.
“It is a trend in the ferro-alloys industry, and we can expect more enterprises to go green in 2024,” Wanli Shi, secretary-general of the China Ferroalloy Industry Association, said.
Green electricity is the main priority for smelters in their push for green certification, because of its cost efficiencies and easy access, Shi told Fastmarkets.
More ferro-silicon producers intend to increase their use of wind power rather than thermal coal to generate electricity.
The price of ferro-silicon largely depends on changes in the cost of electricity, and changes in overseas energy prices and semi-coke prices, according to multiple market sources.
The price of electricity across major ferro-silicon production hubs in 2024 was not expected to rise, and could drop because more ferro-silicon producers in northwestern China will turn to green power to align with the overall green alloys development, an analyst with Guoxin Futures said.
A China-based ferro-silicon trader source said that electricity generated for ferro-silicon production primarily comes from coal at the moment.
“But because we are advocating the green steel approach,” he said, “in windy months in northern China, more and more ferro-silicon producers will shift to wind power sources, if possible, which will lower the production cost for ferro-silicon.”
Similarly, silico-manganese and ferro-chrome producers in Inner Mongolia, the production hub for ferro-alloys in China, will also use more green electricity, with the support of local governments.
According to a manganese alloy producer source, the Inner Mongolia government will try to increase the percentage of green electricity consumption in the province to no less than 60% of total electricity use by the second half of 2024.
“Then we will be using cheaper energy,” the producer source said. “The green development is beneficial for us.”
Vanadium will remain oversupplied globally in 2024, according to Chen Donghui, deputy secretary-general of the vanadium section of the China Iron & Steel Association (Cisa).
According to industry sources, the use of vanadium pentoxide in crude steel production is decreasing, in line with the slower growth of the real estate industry in China in 2023 compared with 2016-22. Rebar production in 2023 was lower than in 2016-22.
“More than 80% of vanadium is used in steel production. The downbeat message from real estate sectors in China still weigh on vanadium prices,” a China-based vanadium trader source said.
“[Taking into consideration the ambitions for] ‘carbon peak’ and ‘carbon neutrality’, the vanadium industry will enter a period of transformation and development in 2024,” Chen said.
“[This will be] characterized by less vanadium use in steel sectors and more vanadium use in non-steel sectors,” Chen added. “More vanadium will be used in green energy in 2024, including vanadium batteries, which command less than 1% of the energy storage industry, while lithium batteries have 96.5%.”
According to industry sources, vanadium battery technology will probably boom in 2025. It is estimated that global vanadium energy storage uses will consume approximately 45,000 tonnes per year of vanadium pentoxide.
“Many vanadium market participants have a promising outlook for the development of vanadium batteries,” a second China-based vanadium trader source said, “given that overall policies have gradually shifted to greener technologies and energy, which may be a huge driving force for the wider application of vanadium batteries [in 2024].”
Green developments will also steer the restructuring of the Chinese ferro-alloys industry, according to sector sources.
Green electricity, such as is generated by wind and solar energy, is mainly generated and used in Inner Mongolia, in northern China, compared with the south of the country, where thermal power or hydropower is used.
“We will see a new layout of ferro-alloys production from 2024,” Shi said. “Northern China will have a bigger market share in ferro-alloys, because of access to green electricity, while southern smelters may face being shut down or being phased-out under the fierce competition.”
According to the country’s National Bureau of Statistics, China’s annual ferro-alloys output in 2023 was 34.74 million tonnes, up by 2% compared with 2022’s 34.10 million tonnes.
“I expect that ferro-alloys output in 2024 will be flat to the 2023 level, but demand will fall,” Shi said, “and then, only those who produce green products with cost advantages will be competitive.”
In addition to the use of green electricity, Shi named three other approaches that the Chinese ferro-alloys industry is working on or which it plans to research.
The first approach is innovations in smelter technology. Although big smelters were already using advanced production technologies, there is still room to upgrade facilities or to optimize for the production of greener products, Shi said.
The second approach is hydrogen energy research. Green hydrogen, as part of the new clean energy era, will play an increasingly important role in smelting. On December 5 last year, Inner Mongolia announced its energy development plan under the 14th Five-Year Plan, in which green hydrogen research will be conducted to drive green and low-carbon developments in the region.
The third approach is to find a substitute for coke. Coke is the main reductant in the ferro-alloys production process. “Although it is quite difficult to find a replacement,” Shi said, “it is still under consideration and worth the effort and investment.”
Do not miss the chance to expand your network and connect with Asia’s most influential decision-makers from across the ferro-alloys supply chain, at Fastmarkets’ ferro-alloys Asian Conference 2024 in Hong Kong on February 26-28. Register here now.