US ferro-alloy markets peak in wake of Russia’s war on Ukraine
The ferro-alloy markets in the United States have mostly surged since the start of Russia’s war in Ukraine
Since the Russian invasion of its neighboring country on February 24, the US government has enacted increasingly harsh sanctions against shipments of Russian commodities.
The US revoked normal trade relations with Russia on April 8 by passing a bill that triggered substantial duties on several commodities, including ferro-alloys.
The US relies heavily on imports of ferro-alloys - most of which go to steel mills - and Russia has until now been a major supplier. Russian material accounted for 11.7% of all US ferro-alloy imports in 2021, according to US Customs data.
Aside from the duties, US steel mills face concerns regarding security of supply, with most contracts being for one year or even multiple years. Further sanctions or a blockage of Russian ferro-alloys could send mills scrambling to cover supplies for the second half of the year.
While the US relies on Russian ferro-alloys to varying degrees, the overall effect has largely sent prices in one direction - upward.
The high-carbon and low-carbon ferro-chrome markets have been affected dramatically.
The US does not produce these materials, so any supply chain disruptions can have profound consequences on prices, and Russia is a significant source, particularly for low-carbon chrome.
Meanwhile, the loss of normal trade relations has triggered an additional 7.5% duty on Russian high-carbon ferro-chrome.
Fastmarkets most recently assessed the price for ferro-chrome high carbon 6-8%, basis 60-65% Cr, max 2% Si, in-whs Pittsburgh, at $3.90-4.15 per lb on May 5, an all-time high.
The current price represented a 78.1% increase from $2.20-2.32 per lb on February 17, the last assessment before the Russian invasion.
Last year, Russia-origin imports of high-carbon ferro-chrome into the US totaled 17,559 tonnes, representing 12.39% of the 141,739 tonnes imported from countries other than South Africa, according to US Customs data.
South Africa is the largest source of ferro-chrome for the US, in the form of charge chrome, but included in the overall US high-carbon ferro-chrome import statistics.
Meanwhile, Russia-origin imports totaled 17,869 tonnes through the first three months of 2022, representing 36.27% of the overall 49,266 tonnes imported from countries other than South Africa.
The potential break in the flow of supply from Russia has sent shockwaves through the industry, driving prices up to record heights.
While the effect on high-carbon ferro-chrome has been substantial, US reliance on Russian imports of low-carbon ferro-chrome is much stronger.
The US is not alone, however, because market participants estimated that Russia supplies roughly 50% of the world’s low-carbon ferro-chrome needs outside of China.
The loss of ‘most favored nation’ status has been much harsher on Russia-origin imports of low-carbon material, because an additional duty of 30% has been levied on these products.
The prices of all three major low-carbon grades have reached all-time highs since the invasion of Ukraine.
Fastmarkets assessed the price for ferro-chrome low carbon 0.10% C, 62% Cr min, in-whs Pittsburgh, at $6.50-6.75 per lb on May 5. This showed a 79.05% upswing from $3.65-3.75 per lb on February 17.
Meanwhile, Fastmarkets assessed the price for ferro-chrome low carbon 0.15% C, 60% Cr min, in-whs Pittsburgh, at $6.40-6.50 per lb on May 5, up by 80.42% from $3.55-3.60 per lb on February 17.
Similarly, Fastmarkets assessed the price for ferrochrome low carbon 0.05% C, 65% Cr min, in-whs Pittsburgh, at $6.80-7.00 per lb on May 5, up 80.39% from $3.80-3.85 per lb on February 17.
People are nervous about future Russian low-carbon materials being available. It’s a name-your-price world today, with severe supply chain issues still wreaking havoc in this space.
The US imported 30,884 tonnes of Russia-origin low-carbon ferro-chrome material across all grades in 2021, representing 53.56% of the total of 57,661 tonnes imported by the US.
Through the first three months of 2022, US imports of low-carbon ferro-chrome from Russia totaled 8,473 tonnes, 62.51% of the 13,554 tonnes imported.
Ferro-titanium prices have soared in the West since the start of the conflict because fears regarding Russian supply have built up since the invasion of Ukraine.
In addition, prompt delivery scrap material, used to produce ferro-titanium, was currently hard to find and expensive to obtain.
The market was softening, however, with reserves being released, but some sources reported that renewed demand from steelmakers was likely.
Fastmarkets most recently assessed the price of ferro-titanium 68-72% Ti, ex-whs US, at $9.10-10.00 per lb on May 5, unchanged from the previous two sessions.
The price has softened slightly from its April 14 peak of $9.30-10.00 per lb, the highest since Fastmarkets started recording data for this market in 2017.
At their peak, US ferro-titanium prices showed a 132.53% increase from the assessment on February 17 at $4.00-4.30 per lb.
“These current prices are here to stay. Unless the conflict is resolved, I expect slow and steady price inflation to continue,” a producer source said.
While supply fears have certainly driven large price increases, it was hard to discern how effective this has been in limited supply until this point. But many market participants were making other arrangements.
“While none of our consumers have told us that they would not take Russian ferro-titanium, our shipment broker recently said it would not transport any,” a distributor source said.
The loss of favored-nation status has resulted in additional 25% duties on Russian ferro-titanium headed for the US.
Russia-origin material accounted for 1,510 tonnes of US ferro-titanium imports, representing 35.7% of the total 4,230 tonnes arriving on US soil from overseas.
The US ferro-silicon market has similarly been affected by the Russia-Ukraine war, with fears that supply from the largest import source would be cut off fueling a price run.
The US does have significant production of ferro-silicon domestically, and Russia has been the most significant source of imports for several years.
Fastmarkets assessed the price of ferro-silicon 75% Si, in-whs Pittsburgh, at $3.40-3.65 per lb on May 5, following a recent drop-off from an all-time high sparked by the Russian invasion.
“The [ferro-silicon] market has settled down recently with buyers hitting the pause button after the original panic,” a supplier source said.
Prior to last week’s decline, resulting from a prolonged period of inactivity in the spot market, prices were at an all-time high of $3.65-4.00 per lb, up by 16.79% from $3.25-3.30 per lb on February 17.
While prices had already been elevated, due in large part to regional tightness resulting from significant global shipping and logistics issues, the Russian war shook up the ferro-silicon market further.
The loss of ‘most favored nation’ status has resulted in an additional 11.5% duty on Russia-origin ferro-silicon inputs arriving in the U.S.
The heavy US reliance on Russian ferro-silicon has led to significant concern in the market.
In 2021, the US imported 66,219 tonnes of ferro-silicon from Russia, representing 43% of the total 153,984 tonnes that have arrived in the US from overseas, according to US Customs data.
The dependence on Russia has been even more significant over the first three months of 2022, with the US importing 23,418 tonnes of ferro-silicon from Russia over the period, accounting for 51.67% of the 45,326 tonnes that have arrived in the US from outside sources.
While the market remained tight for prompt material, and concerns over the future supply chain continued, market participants have noted a lack of spot interest in recent weeks.
This market is paralyzed because the vast majority of [ferro-silicon volumes] are locked up under long-term contracts, which doesn’t allow or offer the traders liquidity to bring it here
Overall demand through long-term contract intake remained very healthy, however, keeping available supplies thin.
“Our contract customers continue to pull at a good, above-average rate,” the second supplier source added.
The US ferro-vanadium market similarly took flight after the Russian invasion into Ukraine, with Russia a significant cog in the vanadium supply chain.
Fastmarkets’ assessments of the price of ferro-vanadium 70-80% V, in-whs Pittsburgh, peaked on April 7 at $34.00-34.50 per lb, up by 73.42% from $19.50-20.00 per lb on February 17, the last assessment date before the conflict.
While prices have since retreated, they remained at $29.00-29.50 per lb in Fastmarkets’ assessment on May 5.
After the initial panic sparked by the invasion fostered a more active environment and sent prices running, recent declines have largely been the result of a lack of consumer interest in the spot market while the majority continued to be covered by long-term contract requirements.
Market participants noted that most consumers adopted a wait-and-see approach after the initial price jump, with prices retreating in a static market following declines in the European market.
“There was an initial run following the start of the war, but it has been pretty dead for a few weeks now,” a supplier source said. “The few inquiries that have come out have received aggressive offers, with profit still secured by the sellers.”
The loss of ‘most favored nation’ status for Russia has resulted in an additional 25% duty on any material due to arrive in the US.
While US imports of Russian ferro-vanadium have been limited to 40 tonnes over the first three months of 2022, Russian material was more of a factor in previous years.
In 2021, the US imported 637 tonnes of Russia-origin ferro-vanadium, accounting for 22.05% of the total 2,891 tonnes imported to the US from foreign sources, according to US Customs data.
The market seemed to be more concerned with the potential flagging of ferro-vanadium which was converted outside of Russia from Russia-origin vanadium-bearing slag material.
“At this point, the material made using Russian slag is not being affected, so supply should be covered, but if that were somehow sanctioned we could have a problem,” a second supplier source said.
Although the effect has not been as drastic in the manganese alloys markets, prices for both US high-carbon ferro-manganese and silico-manganese have not been immune to the Russia-Ukraine conflict
Fastmarkets assessed the price of ferro-manganese high carbon 78% Mn, standard 7.5% C, in-whs Pittsburgh, at $2,800-2,900 per long ton on May 5, up by 8.57% from $2,600-2,650 per long ton on February 17.
Similarly, Fastmarkets assessed the price of silico-manganese 65% Mn min, min 16% Si, in-whs Pittsburgh, at a record high of $1.30-1.35 per lb on May 5, up by 8.16% from $1.20-1.25 per lb on February 17.
While the reliance on Russia for imports of manganese alloys has not been overwhelming in the past, it seemed due to increase over the course of 2022 if not for the war and the subsequent fallout.
US imports of Russian high-carbon ferro-manganese came to 7,751 tonnes over the first three months of 2022, with 15.91% of the total 48,708 tonnes imported from foreign sources. This compared with 15,469 tonnes over the entirety of 2021, representing only 6.9% of the 224,079 tonnes imported overall.
Meanwhile, US imports of silico-manganese from Russia totaled 8,247 tonnes over the first quarter of 2022, some 8.51% of the overall 96,933 tonnes imported. This compared with 15,435 tonnes over the course of 2021, representing only 4.99% of the overall 309,154 tonnes of total imports.
Whether these trends would have continued throughout 2022 if not for the conflict was unclear, but early indications suggested that US steel mills would have relied even more heavily on Russia-origin manganese alloy imports this year.
Following the loss of ‘most favored nation’ status, Russia-origin high-carbon ferro-manganese and silico-manganese now faced additional duty of 10.5% and 23% respectively, when arriving on US soil.
Market participants suggested that US mills may be able to pivot more easily in these markets, given the lesser dependence on Russia for these materials compared with the other ferro-alloys. They have expressed doubt that the currently high prices will continue to rise.