Members of the Roskill steel alloys team, Nils Backeberg and Ramsey Yavuz, attended the virtual Fastmarkets International Ferroalloys 2020 conference between 9 and 11 November 2020. The conference provided mine-to-steel market analysis and outlook on chromium, manganese, vanadium, silicon, molybdenum and nickel, as well as expectations for future market growth from the electric vehicle (EV), lithium-ion battery and wider energy storage sectors. A host of speakers covered topics across the ferroalloys industry supply chain, including the import and export of ferroalloys and steel demand trends, while focussing on the impacts of the COVID-19 pandemic on each.
In light of the evolving second wave of COVID-19 and related lockdowns, all presentations and discussions centred around the impacts of the pandemic across the ferroalloys supply chain. The general sentiment was that the recovery of economic activity has been largely on a regional basis, with recovery in China leading the rest of the world following the initial impact of COVID-19 in H1 2020.
However, expectations over Q4 2020 still remain uncertain, with major concerns relating to the broader global impact and duration of reduced consumer demand, particularly with respect to the world outside of China. Looking at short-term fundamentals, some delegates remain pessimistic that steel demand will return to pre-COVID-19 levels in 2021, despite the V-shaped recovery patterns.
Below are some key takeaways from the conference.
Much of the chromium session was centred around the South African export tax announcement and impacts on the domestic and global markets. The question that was most intensely discussed was, how would China respond to this tax? Would China be a price taker and absorb the tax, or would China push back and impose import taxes on South African ferrochrome, or something in between? Sibanye Stillwater presented on the South African chromium industry and highlighted that a group of non-integrated ore producers, i.e. those that export all their production, are challenging the export tax.
There was a broad consensus of near-term softness in manganese ore prices following the strong recovery of manganese ore output from key producer countries over H2 2020. Although manganese ore demand from China remains strong, there has been an inventory build-up of port side stocks which has weighed on manganese ore prices. The recovery of production costs after softening early in 2020 likely supports prices over US$4/dmtu on a CIF China basis, where there may well be a cost push on prices into the tail end of this year.
Chinese (US$7/lb) and European (US$5.45/lb) vanadium pentoxide prices shows regional arbitrage, evidenced by decoupled market conditions between China and the rest of the world. A similar picture can be seen in ferrovanadium prices with Chinese prices trading around US$30/kg V and European prices around US$24/kg V. Strong steel demand from China, led by government infrastructure spending, has provided support to Chinese vanadium demand. In the rest of the world, a recovery in steel production over the next few months should prompt higher demand for vanadium products and support prices. Overall, prices are anticipated to be supportive up until the Chinese New Year in February 2021 for both vanadium pentoxide and ferrovanadium prices in China. There remains some limited downside risk. Meanwhile, prices in Europe could see upside, although this would be limited owing to uncertain regional steel demand.
The bounce back of the steel sector in H2 2020 is increasing demand for ferrosilicon, while supply appears to be lagging recent demand levels. Renewed ferrosilicon demand from construction and manufacturing end-use sectors has seen an oversupplied market move into deficit. Despite an increase in European ferrosilicon prices amid improved demand from European steel mills, prices will have to recover further to incentivise ferrosilicon suppliers to cover production costs and bring the market back into balance.
China posted record import volumes of molybdenum concentrate and oxides over 2020 as mine production in China declined on a y-o-y basis over H1 2020. The molybdenum oxide price fell by 18% y-o-y in Q1 2020 and some primary miners responded by cutting back production at certain operations, while copper by-product supply benefited from a bullish copper price. As of Q3 2020, the Yichun Luming mine in China and other small extensions of mine supply have come back online, although limited in scale, as environmental issues related to a tailings spill in early 2020 saw production suspended. With steel production ramping up in China, demand is likely to place pressure on supply in the short-term due to depleting ore grades from existing mine supply in China and South America.
The broad view was that the nickel market remains well supplied for 2020 with a moderate surplus expected over 2021. COVID-19 dealt a blow to alloys on the demand side, however, particularly for superalloys used in the aerospace industry. Oil & gas and automotive sectors have also been strongly impacted. The robust recovery of stainless steel production in China and Indonesia surprised delegates with double-digit growth experienced in 2020, however, this was partially offset by a soft stainless steel market in the rest of the world. Overall, outlook for the stainless steel industry was viewed as positive with China being a major consumer and producer of stainless steel.
Roskill’s NEW Manganese: Outlook to 2030, 16th Edition report was published in November 2020 and provides you with analysis on supply, demand, trade, prices, cost curves and forecasts; for more information or to subscribe, click here. For Roskill’s full range of reports, click here.