1. Slow growth in China

Slow growth in China continued to spook market participants. Those who have recently returned from trips there shared anecdotes and photographs on social media of blue skies and a lack of cranes and active construction sites, while remaining acutely aware of the importance of the world’s second-largest economy. Find out more about this evolving market at Fastmarkets Ferroalloys Asian Conference 2024. Learn more.

“China gives the direction; it’s the captain,” one ferro-chrome market participant told Fastmarkets on the sidelines of the conference.

2. High electricity prices

Even though electricity prices have come down, they were still extremely high historically and at the forefront of people’s minds, making up a huge portion of input costs. This made sellers reluctant to reduce prices despite subdued demand, leading to suggestions of production cuts in various markets.

3. Potential growth in India

There was a lot of potential for growth in India’s domestic market, but we should not expect it to be the ‘next China.’

“[The economy of] India needs to grow by 10% to offset China dropping by 1%, to keep global steel production stable,” Kevin Fowkes, research director at global consultant Wood MacKenzie, told delegates while speaking on the manganese ore and alloy panel on Monday afternoon.

4. Global uncertainty

Delegates were still wading through exceptionally high levels of uncertainty in geopolitics and macro-economics, with high interest rates and inflation forcing them to rethink trading strategies.

Legislative changes in Europe, in the form of the Carbon Border Adjustment Mechanism (CBAM), added another layer of complexity, with few people understanding what it meant for them, and how and even whether it will work.

“The reporting periods are coming soon, and the [levels of reported emissions] are going to be horrendous,” one financial source told Fastmarkets on the sidelines.

5. Mine depletion

Mine depletion remained a long-term concern, with the manganese content of ore from various origins expected to reduce over the next few years.

Fastmarkets heard that these declining grades could mean “higher costs and a greater environmental burden,” Jack Bedder, founder of data provider Project Blue, told delegates from the manganese panel. But, if it were economical, the sintering of fines could be an alternative method to upgrade lower-content ores, industry sources said.

6. Decarbonization

Decarbonization by 2050 would not be achieved without offsets and there were significant trade-offs, such as balancing the need for greener reductants against wider environmental degradation.

One example of this would be making sure that the replacement of coke with green alternatives, such as acacia and bamboo chips, did not lead to deforestation.

The post Six things we have learnt in Prague: IFA 2023 appeared first on Fastmarkets.

In the calculation of the index, if price data is received for material with chrome to iron ratios different from that of the index basis, this is normalized using in-house developed models based on regression analysis.

The change in the base chrome to iron ratio is aimed at increasing the predictability of the index calculation by helping to reduce the degree of normalization required to adjust prices for the most liquid products to the index base specification.

Fastmarkets will not proceed with the proposal to expand the range of ratios accepted to include 1.37:1 on the upper end, from 1.35:1 currently, because of a lack of clear support.

The changes to the specification will be as follows:

MB-CHO-0003 Chrome ore South Africa UG2/MG concentrates index, cif China, $/tonne
Quality: Up to 2mm (99% min); Cr range 40-42%; Silica max 6%; Alumina max 18%; MgO max 16%; P max 0.01%; S max 0.01%; chrome iron ratio 1.27:1-1.35:1, basis 1.3:1
Quantity: Min 5,000 tonnes
Location: cif Tianjin, China (normalized for any Chinese mainland sea port)
Unit: USD per tonne
Payment terms: Payment at sight
Publication: Weekly. Tuesday 2-3pm London time
Notes: Bulk (container deals normalized)

This price is a part of the Fastmarkets ores & alloys physical prices package.

Fastmarkets’ index methodology screens outliers and applies a quantity-weighted model to ensure that the chrome ore South Africa UG2/MG concentrates index, cif China is the most robust in the industry. Fastmarkets has no financial interest in the level or direction of the index.

To provide feedback on this index or if you would like to provide price information by becoming a data submitter, please contact Claire Patel Campbell by email at: pricing@fastmarkets.com. Please add the subject heading “FAO: Claire Patel-Campbell, re: UG2/MG chrome ore index.” Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets’ pricing methodology and specification documents go to https://www.fastmarkets.com/methodology.

The post Amendment to UG2/MG chrome ore index appeared first on Fastmarkets.

As LME Week nears, Fastmarkets looks at the impact of four currencies and their interactions over recent months.

Rand movements hit chromium, manganese markets

Manganese and chrome markets both have exposure to the volatile South African rand because South Africa is a key production hub for these materials.

In theory, when a commodity producer’s home currency weakens against the dollar, they earn more in their home currency when they sell in dollar-denominated markets. But there are exceptions, such as when input costs are paid in dollars.

In the non-metallurgical chromite market, sources said in September that rising input costs had been exacerbated by the weakness of the rand against the dollar, with increases in costs in rand terms outpacing increases in sales prices in dollar terms.

But in the metallurgical market, where consistently high prices allow greater margins, the effect of diesel and trucking costs is less pronounced, a chrome ore trader told Fastmarkets, meaning fluctuations in the rand also have less of an effect.

Rand movements also have an influence on trucking, with weakness potentially exacerbating rising diesel prices, since the oil price is denominated in dollars.

“If the market [for manganese ore] was at [higher prices] and the rand was at 19 to the US dollar, then yes, producers would be able to move more by road and still be profitable compared to the current [lower prices] and the same exchange rate,” a manganese producer told Fastmarkets.

On the other hand, when the rand was stronger during July this year, it reduced the margin between trucking costs and product prices when the sales price was already low.

While manganese is more commonly moved by less expensive rail transport on pre-agreed contracts, rand fluctuations and their impact on margins can be a factor in whether miners opt to use road transport, and such decisions affect overall export volumes.

In a market like ferro-chrome where material is often moved by truck and profit margins are also small amid lower product prices, rand fluctuations can have even more impact.

“There’s so much cost pressure that 19 [rand to the dollar] is now the new normal. It’s not giving producers respite; it’s not allowing them to increase their profit. It’s a safety net, but just a tiny bit,” a ferro-chrome trader told Fastmarkets.

“If [chrome ore is at high prices], alloys are not making money, even with the rand at 19.20. We’re waiting for more improvement on the alloy price.”

Tied into this is the ongoing issue of loadshedding – controlled power outages – in South Africa, leading to producers increasing reliance on diesel-powered backup generators, which become less economical to run when the diesel price rises, and if the rand weakens.

“A weaker rand is beneficial for producers, but on the other hand, it results in higher costs [such as diesel]. Coupled with loadshedding, it makes production more costly and complicated,” a chrome ore trader said.

The rand has been so volatile recently that it has been difficult to make longer-term decisions, sources told Fastmarkets.

“Diesel prices went up drastically [in September and October]. Exchange rate movements [could] have alleviated some of the increase,” the manganese ore producer said.

“However, our long-term forecast on the USD/ZAR exchange rate [had] not yet been revised given the constant changes, so the weakening would assist producers, but I don’t think many producers would have implemented too many changes in only one week of rand weakness.”

According to currency exchange website Oanda.com, there were 18.78 rand to the dollar as of September 1, weakening to 19.21 as of September 7, before strengthening to 18.75 as of September 24. As of October 6, the value was 19.45 rand to the dollar.

Yuan movements create buyer caution

Fluctuations in the yuan against the dollar have also affected both manganese and chrome markets, since large volumes of these materials are sold into China.

Seaborne manganese ore and chrome ore buyers in China, for example, would typically benefit from a stronger yuan, since this would decrease import costs in terms of the conversion value, while a weaker yuan would drive their costs up.

The chrome ore market is particularly exposed to the yuan today, sources pointed out, saying buyers face risk and uncertainty because their costs are unknown until they fix their exchange rate conversions.

“In periods where there’s a lot of volatility in the yuan, particularly when it’s weakening, it creates an exchange rate risk for buyers. Let’s say you buy material at [a given price in dollars] but you haven’t fixed your foreign exchange conversion to yuan – until you fix that exchange rate, you have an unknown cost in the domestic Chinese currency,” the chrome ore trader said.

Alongside this, in China’s portside spot market, where port traders sell in yuan, if the chrome ore price stays flat in dollars but the yuan weakens, they will increase their offer price in yuan to compensate, and vice versa.

“Right now, we’re in a situation where there’s so little port stock that everyone has to buy from the forward market anyway and that’s what’s keeping the [chrome ore] price so high. As a result of that, everyone is focused on the exchange rate,” the first chrome ore trader said.

In the manganese market, during September, the depreciation of the yuan also had a direct effect on seaborne prices, pulling them down amid buyside concern over increased import costs.

A Chinese manganese ore trader said at the time that the exchange rate movements had led to dwindling profit margins following purchases of Gabonese ore.

Fastmarkets’ weekly calculation of its chrome ore South Africa UG2/MG concentrates index, cif China was at $303 per tonne on Tuesday October 3, close to the $305 per tonne high for the year to date, set in May.

As of Friday October 6, Fastmarkets’ weekly calculation of its manganese ore index, 37% Mn, cif Tianjin, was at $3.60 per dry metric ton unit, versus a high for 2023 so far of $4.59 per dmtu set in February, and the weekly calculation of its manganese ore index, 44% Mn, cif Tianjin was at $4.29 per dmtu, compared with a year-to-date high of $6.14 per dmtu in February.

According to Oanda.com, there were 7.20 yuan to the dollar as of October 6, compared with 7.34 yuan to the dollar on September 6.

Lira fluctuations affect Turkish flat steel prices

The lira has steadily weakened since gaining some strength against the dollar in the immediate aftermath of the announcement of a major rate hike in August from the country’s central bank.

The lira strengthened to 26.31 lira to the dollar on August 26, versus 27.20 lira to the dollar on August 23, the day before the rate hike announcement.

As of October 6, there were 27.56 lira to the dollar, compared with 18.68 lira at the start of 2023.

In July and August, the weakness of the Turkish currency had a dampening effect on demand for domestic flat steel in the country, Fastmarkets reported.

Because flat steel is traded in dollars in Turkey, buyers could not forecast how much they would pay when they received the product about two months after placing an order, a steel service center source said.

“[If] you order about 10,000 tonnes of steel, you need to pay about 200 million lira [and] most companies do not have such [a big] credit limit. In addition, the risk of steel prices decreasing significantly, or the Turkish lira losing value [again, are] always there. As a result, we have reduced the tonnages we order to reduce the risk,” the service center source said at the time.

Also in August, there were rises for domestic rebar and wire rod prices as a result of the weakness of the lira against the dollar.

Turkish mills mostly buy raw materials in US dollars before selling finished steel products to the domestic market in the local currency, meaning a weaker lira may prompt an increase in product prices.

Fastmarkets’ weekly price assessment for steel reinforcing bar (rebar) domestic, exw Turkey was 19,200-19,700 lira per tonne on August 24, but has since come down slightly, standing at 18,900-19,650 lira per tonne on October 5.

Egypt faces weak pound, lack of foreign currency

Protracted weakness in the Egyptian pound has loomed over the country’s steel industry throughout 2023, causing producers to increase prices for products, including rebar, while they shoulder rising costs for raw materials priced in dollars.

The Egyptian pound was trading at E£30.77 to the dollar on October 6, according to Oanda.com, compared with E£27.67 to the dollar in January and E£24.69 to the dollar in late December 2022.

In the imported billet market in particular, deals have been scarce in Egypt in recent days since buyers have also been constrained by a lack of foreign currency, which Egyptian steelmakers need to pay for raw materials imports.

Egypt had record rebar consumption for 2023 so far in August, but demand for both rebar and billet products has been comparatively low year on year, with buyers choosing local billet over imports because of the struggle to obtain the foreign currencies needed to pay for overseas billet.

Since international trade sanctions were introduced following Russia’s invasion of Ukraine in February 2022, Egypt remains one of the few countries without restrictions on Russian steel billet imports, but deals have been scarce because of Egypt’s shortage of foreign currencies.

In addition, after announcing plans to impose export duties on steel from October 1, Russian mills moved to raise offer prices, but the Egyptian market would not accept the higher levels because of the shortage.

As a result, Fastmarkets’ weekly price assessment for steel billet import, cfr main port Egypt was $515-520 per tonne on September 28, down 2.36% from $520-540 per tonne on September 21, although the price had widened slightly as of the most recent assessment on October 5, to $510-530 per tonne.

The post Currency volatility looms large over alloys, steel markets: LME Week appeared first on Fastmarkets.

This year, alloy and oxide markets have seen even more pronounced volatility, at least part of which has been linked in recent months to the upstream situation in Chile and Peru, which are among the major production hubs for molybdenum.

Drought in Chile and social unrest in Peru were cited among the reasons for the decline in molybdenum production in the two countries, contributing to record high ferro-molybdenum and molybdic oxide prices, along with decreased imports of the alloy from South Korea and Armenia.

By January this year, the wide spreads and large swings that have characterized price moves for much of 2023 had begun to emerge, and in February, ferro-molybdenum prices had hit $101-110 per kg Mo in Rotterdam.

This marked the first time the price had breached $100 per kg Mo since June 2005. Around the same time, molybdic oxide prices in Rotterdam reached $39-40 per lb Mo, the highest since May 2005.

Since then, both prices have seen rapid, albeit less dramatic, movement, with ferro-molybdenum at $x in Rotterdam as of per kg Mo and molybdic oxide in Rotterdam at $x per lb Mo as of October 6.

Participants in molybdic oxide and ferro-molybdenum markets in Europe have also described muted spot activity because those converting molybdic oxide to ferro-molybdenum face tight margins, and a weak steel market adds pressure on sellers.

The upstream influence

The influence of the upstream market has been undeniable, with fluctuations in the molybdenum concentrate market at the root of some of the most pronounced volatility in alloy and oxide prices this year.

But whether there will be a deficit of concentrate this year or next is far from clear.

On the one side, a trader was relatively convinced of a shortage.

“[I think] this year will be the third year in a row of deficits for molybdenum,” the trader told Fastmarkets. “[It could be] about a 4% deficit, which would be quite significant.”

A second trader added that the potential deficit could be 25 million-30 million lb, although they added that it was uncertain whether this will come to pass or not.

In 2022, according to data published by the International Molybdenum Association (IMOA), total output globally was 577.8 million lb. Assuming output remains flat in 2023, a difference between output and consumption of 25 million lb would put the disparity between the two at 4.23%.

“It is quite hard to tell. With China figures, we can never quite tell. For this quarter, [it seems] there’s a bit more coming from some places, with new mines now producing. If that continues into the fourth quarter, there could be a bit more output than was originally expected,” the second trader said.

“My feeling was that there could be a bit more this quarter, but not enough to make up for [shortfalls]. The market is still tight,” the second trader continued, adding that going into next year there has been a lack of consensus over whether the market will be balanced or will see a small deficit.

“I think it is a bit unlikely to be balanced,” the second trader said. “Any changes are likely to be to the downside on production.”

This could contribute to ongoing elevated prices next year, they suggested, although it will also depend partly on how the European market performs, as cost concerns and inflationary pressures persist. Importantly, it will also depend on China.

“China absolutely dominates this market. What’s going on in China is the key to the whole thing. I do think the market is still going to be tight in the fourth quarter and into the first quarter of next year,” the second trader said.

“There’s no resilience. Unless demand is dropping, which it isn’t likely to, there isn’t a lot of back up. It doesn’t take much for something to impact on the supply side,” the second trader added.

On the other side of the argument, a third trader suggested there was almost no chance of a deficit.

“I definitely don’t see a shortage of concentrate,” the third trader said. “If we go by annual consumption, [I think] that’s going up by about 3% next year, but from this year to next year, you also have Teck and Anglo [potentially producing more].”

The third trader stressed, meanwhile, that they did not see plain sailing ahead for the molybdenum market.

“Will the market be tight? Probably. Then also with the cost of financing, I think premiums this year will be high. Next year, it won’t be a smooth ride,” the third trader said.

Another key consideration is demand, a fourth trader told Fastmarkets.

“It’s very unpredictable. China is the biggest in terms of supply and consumption, but the domestic market information is not easy to access,” the fourth trader said.

“It’s very hard to judge what’s actually going to happen to the market [even] a few months from now. All in all, it’s proved it can be very volatile.”

What does global concentrate data show?

Data published by IMOA has shown falling production in 2021 and 2022, while consumption rose while industrial activity returned to normal in the wake of the Covid-19 pandemic. But the most recent figures, covering the first quarter of 2023, show something of a shift.

In 2021, according to IMOA data, global production of molybdenum was 581.4 million lb, down 3% year on year, while global consumption was 614.3 million lb, up 14% from 2020.

In 2022, global production was 577.8 million lb, down 1% from 2021, while global consumption was 631.5 million lb, up 3% year on year.

This suggests a disparity in output versus consumption in 2021 of 5.5%, and a disparity of 8.9% in 2022.

In both 2021 and 2022, China was the largest producer and the largest consumer of molybdenum, while South America was the second largest producer and Europe the second largest consumer, the figures showed.

In IMOA’s data for the first quarter of 2023, global production was down 3% quarter on quarter to 146.8 million lb, although this was up 6% year on year.

During the quarter, global consumption was also down, falling to 144 million lb, a decline of 8% quarter on quarter, and 6% year on year, according to IMOA.

In this period, China was the only producing region to see an increase in output, at 67.2 million lb, up 3% quarter on quarter and 14% year on year, the IMOA figures showed. At 41.2 million lb, South American production was down 7% quarter on quarter and 2% year on year.

China remained the largest user during the first quarter of 2023, but its consumption also saw the largest decline for the period, at 56.1 million lb, down 19% quarter on quarter and 14% year on year. Meanwhile, Europe – the second largest consumer – saw increases in consumption of 5% quarter on quarter and 8% year on year.

IMOA does not publish forecasts on total molybdenum output and does not comment on the global molybdenum market.

What do upstream production figures show?

In 2022, Chinese producer CMOC, for example, posted output of molybdenum metal of 15,114 tonnes and sales of 16,044 tonnes. Production was down 7.76% and sales were down 3.13%.

For 2023, the company posted guidance of 12,000-15,000 tonnes, although there was no commentary on the reason for the projected figure.

Poland-headquartered KGHM, which has a 55% stake in the Sierra Gorda open-pit copper and molybdenum mine in Chile, said in its assumptions for its 2023 budget that it expected 5.7 million lb of molybdenum production during the year, on a 55% basis.

KGHM holds its stake in the mine alongside South32, which holds the remaining 45% as of February 2022.

In 2022, based on its stake, KGHM posted molybdenum output from Sierra Gorda of 2.9 million lb, compared with 8.2 million lb in 2021. The decline was linked to lower molybdenum grade in the processed feed, leading to lower recovery rates and in turn lower metal production, Fastmarkets understands.

Meanwhile, US-headquartered Freeport McMoRan, which describes itself as the world’s largest producer of molybdenum, reported 85 million lb of production in 2022, flat against the year before, and up from 76 million lb in 2020.

In its second-quarter earnings release, the company said it was expecting 79 million lb of molybdenum sales in 2023, which will be roughly equivalent to the amount it produces, Fastmarkets understands. The earnings release did not go into detail on the reason, but it is understood to be linked to mine sequencing and grade.

Chilean state-owned copper miner Codelco said in its annual report for 2022 that it produced 20,498 tonnes of molybdenum during the year, down from 21,045 tonnes in 2021, and has provided guidance of 18,000 tonnes for 2023, and 17,500-18,500 tonnes in 2024. It also cited the prolonged drought in the country as one of its strategic risks.

The company cited delays on structural projects, and especially the Chuquicamata Underground mine, along with “operational issues” as reasons for the decrease in molybdenum output.

London-headquartered, Chile-focused Antofagasta saw molybdenum output of 9,700 tonnes in 2022, down from 10,500 tonnes the year before, although it is projecting 10,000-11,500 tonnes of production in 2023.

It cited the drought in Chile as a contributing factor, along with a decline in throughput and grades at its Los Pelambres mine, although its Centinela mine saw increased molybdenum output following an increase in grades. The higher overall production expectation in 2023 is based on higher throughput at Los Pelambres in particular.

At Rio Tinto, which produces molybdenum at its Kennecott operations in the US, production figures in its 2022 annual report showed declining molybdenum output year over year, from 20,400 tonnes in 2020, to 7,600 tonnes in 2021 and 3,300 tonnes in 2022.

Production guidance figures were not available for 2023, although as of July, Rio Tinto had reduced its refined copper estimate for the year to 160,000-190,000 tonnes, from 180,000-210,000 tonnes, as the completion of the rebuild of the Kennecott smelter was pushed back to September, from August.

At the same time, additional production from companies including Teck Resources and Anglo American is expected to enter the market in the coming months.

Teck, for example, posted a total of 2.5 million lb of molybdenum production in 2022, but was guiding 4.5 million-6.8 million lb in 2023, according to its annual report for last year, as output from its Quebrada Blanca operations in Chile will be included in the total. In the 2024-2026 period, the guidance figure grows to 14 million-24 million lb.

London-headquartered Anglo American produces molybdenum as a byproduct at its operations in Chile, and will also see output from its Quellaveco operations in Peru.

Total production, including Anglo’s output in Chile from Los Bronces and its 44% stake in Collahuasi, was 5,600 tonnes in 2022, up from 5,400 tonnes in 2021, Fastmarkets understands.

Meanwhile, according to its website, Quellaveco’s molybdenum plant will process 100% of the copper concentrate produced at the mine to obtain molybdenum concentrate at 52% purity, with an estimated output of about 10,000 tonnes per year once the plant is at full capacity.

In the first half of 2023, Quellaveco produced 760 tonnes of molybdenum, although this does not reflect the full half year period, as the plant only came into production after the start of the year, Fastmarkets understands. In total, across all its operations, Anglo produced 3,160 tonnes in the first half.

Australia-headquartered miner MMG, whose molybdenum output comes from its Las Bambas mine, also in Peru, has also seen a major increase in payable metal in molybdenum sold in the first six months of 2023 versus the same period in 2022.

The figure rose from 1,437 tonnes in the first half of 2022, to 2,039 tonnes in the first half of 2023, with fewer road blockages reported in 2023, and greater stability along the Southern Corridor in the country. Las Bambas had suspended operations for more than 50 days in 2022 as a result of social unrest.

Fastmarkets’ analyst view

With all this in mind, what does this mean for the molybdenum market this year and into 2024?

“Molybdenum markets have this year been pinned between slack demand and ongoing supply concerns following underperformance from a number of major miners, particularly in South America, over the last several years,” Fastmarkets analyst Harry Riley-Gould said.

“The result has been that ferro-molybdenum prices have been broadly stable in a rough $50-60 per kg range since April, up from an average of around $27 per kg over 2013-2022.”

This dynamic is expected to continue for at least the next six months, Riley-Gould said, in light of widespread headwinds to downstream steel demand and little sign of a sharp near-term recovery in production volumes.

“But uncertainty remains high and as the price surge in the early part of the year demonstrated, the market is prone to volatility in the absence of reliable data from major production and consumption centers such as China,” he added.

“Longer term, recovering production volumes should bring prices closer to historical average levels, although we currently expect [alloy] prices to remain elevated through to the end of 2024.”

Follow all the latest LME Week insights by visiting our dedicated content hub.

The post Shadow of volatility, questions over concs production hang over molybdenum markets: LME Week appeared first on Fastmarkets.

Specifically, Fastmarkets proposes to amend the base chrome to iron ratio in its chrome ore South Africa UG2/MG concentrates index, cif China to 1.3:1, from 1.27:1 as currently stipulated in the methodology.

This follows initial feedback from market participants and our own analysis of the data we receive on a weekly basis, which shows that 1.3:1 has been the most liquid of the ratios reported since the beginning of the fourth quarter of 2022. The proposed change would be aimed at reflecting the spot market as closely as possible.

In the calculation of the index, if price data is received for material with chrome to iron ratios different from that of the index basis, this is normalized using in-house developed models based on regression analysis.

The proposed change of the base chrome to iron ratio would also be aimed at increasing the predictability of the index calculation by helping to reduce the degree of normalization required to adjust prices for the most liquid products to the index base specification.

Following feedback from the market suggesting material with a ratio of 1.37:1 chrome to iron ore could be considered “MG,” Fastmarkets also proposes to expand the range of ratios accepted to include 1.37:1 on the upper end, from 1.35:1 currently.

The proposed changes to the specification are highlighted below in italics:

MB-CHO-0003 Chrome ore South Africa UG2/MG concentrates index, cif China, $/tonne
Quality: Up to 2mm (99% min); Cr range 40-42%; Silica max 6%; Alumina max 18%; MgO max 16%; P max 0.01%; S max 0.01%; chrome iron ratio 1.27:1-1.37:1, basis 1.3:1
Quantity: Min 5,000 tonnes
Location: cif Tianjin, China (normalized for any Chinese mainland sea port)
Unit: USD per tonne
Payment terms: Payment at sight
Publication: Weekly. Tuesday 2-3pm London time
Notes: Bulk (container deals normalized)

This price is a part of the Fastmarkets Ores & Alloys Physical Prices package.

This six-week open consultation begins on Thursday September 21 and will close on Thursday November 2. The amendment, subject to market feedback, will be implemented as of Tuesday November 14.

To provide feedback on this index or if you would like to provide price information by becoming a data submitter to this index, please contact Claire Patel Campbell by email at: pricing@fastmarkets.com. Please add the subject heading “FAO: Claire Patel-Campbell, re: UG2/MG chrome ore index.” Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request

To see all Fastmarkets’ pricing methodology and specification documents go to https://www.fastmarkets.com/methodology.

The post Proposal to amend baseline chrome iron ratio in UG2/MG chrome ore index appeared first on Fastmarkets.

But the increase in sales prices has not been enough to offset rises in production costs, sources reported during the assessment period.

Diesel prices rose substantially in South Africa, the key production hub for chromite. The South African Department of Mineral Resources and Energy announced increases to both petrol and diesel prices on September 6, with rises for diesel between 2.76 rand and 2.84 rand per liter.

The dried and bagged market has been particularly affected because diesel makes up a greater part of the cost of production than for wet bulk, sources told Fastmarkets. Usage of diesel has also increased due to producers resorting to backup generators while high levels of loadshedding persist in South Africa.

“Diesel prices had a massive increase in September, and we expect further increases in October,” a seller in South Africa said.

“Our drying costs have increased severely as we are running for [long periods] on generators, which are drinking diesel at alarming rates,” the seller added.

“Drying costs are not competitive,” a second seller in South Africa said. “At the end of the day, [I think] the market will have to pay [more], otherwise there’s no incentive for [people] to do dried and bagged. If they’re getting [similar] prices for wet bulk, why go through the hassle of drying and bagging?” they added.

While diesel costs undoubtedly also affect the cost of transporting other types of chrome ore to port and from port to their destination, diesel is a big component of the cost for drying kilns, further contributing to the input cost rises for dried and bagged material, a chrome ore trader in Europe explained.

“The drying kilns are basically run using diesel, or paraffin, and that’s linked to oil prices. Also, right now, there are drying plants that are connected to the grid but don’t have backup generators, so loadshedding causes interruptions and fixed costs go up,” he said.

For those that do have generators, the rising cost of diesel means relying on them rapidly becomes very expensive, he added.

The hike in costs has also been exacerbated by the weakness of the rand against the dollar. The exchange rate was 18.96 rand to the dollar on Wednesday, compared with 17.59 rand at the end of July, according to currency exchange website Oanda.com. This means the rise in costs in rand terms has outpaced the increase in sales prices in dollar terms up to now, sources said.

“The rand has depreciated against the US dollar, so that does increases costs, especially diesel. This also impacts inland logistics costs,” a third seller in South Africa said.

There are additional costs involved in transporting material because it must be moved from the mine to the drying facility and then potentially to a warehouse before it is taken to the port, the trader in Europe said.

“Overall, the transport element of the cost for dried and bagged is [higher] than for metallurgical grade. You’re trucking it more than once,” he said.

“The cost difference [of dried and begged compared to] wet bulk is ballooning. A lot of producers of dried and bagged are under a lot more cost pressure,” he added.

There may also be some upside support to chromite prices from supply tightness at ports, according to a trader in China, but this also may be stymied by currency movements in the Asian country.

“The chromite price is mainly supported by low port inventory, but the fluctuation of the Chinese yuan [exchange rate] against the US dollar makes [trading] quite difficult,” the trader in China said.

There has been a similar effect in the metallurgical market in recent weeks, with buyers reportedly hesitating amid currency fluctuations, with the possibility that the cost to import could be affected by any further weakening of the yuan against the dollar — especially because UG2/MG chrome ore prices have risen in dollar terms.

The exchange rate was 7.29 yuan to the dollar on Wednesday, according to Oanda.com, compared with 7.15 yuan at the end of July.

Wet bulk prices hold steady in quiet spot market

Meanwhile, both foundry and chemical wet bulk prices held steady during the assessment period amid generally quiet spot conditions. Buy-side sources in the chemical and foundry grade markets were less bullish than their counterparts in metallurgical grade markets, however.

Fastmarkets’ fortnightly price assessment for chromite, chemical, 46% Cr2O3 min, wet bulk, fob South Africa held at $310-330 per tonne on Tuesday, after rising in the previous two assessments.

And the fortnightly assessment for chromite, foundry, 46% Cr2O3 min, wet bulk, fob South Africa was also stable at $320-370 per tonne, having also increased in the previous two quotations.

“The trend of chemical grade chromite [pricing] is following the price of metallurgical grade chrome ore, which is generally on the rise. But the truth is, the demand for chemical grade chromite is [flat], almost nothing new in most of 2023,” a buyer in China said.

“I haven’t seen prices coming off, but demand has been weaker, so there could be a bit of pressure coming in these markets,” the second seller in South Africa added.

The post Dried and bagged chromite prices edge up; rising costs pressure producers appeared first on Fastmarkets.

This quarterly ferro-chrome benchmark is settled through negotiations between a major South African ferro-chrome producer and a leading European stainless-steel mill, and published by Fastmarkets after it is announced.

The publication date for the second-quarter benchmark in 2021 was originally set to March 31, 2021, and has now been changed to April 1, 2021, and the publication date for the third-quarter benchmark in 2022 was originally set to 30 June, 2022, and has now been changed to July 1, 2022.

This change enables quarterly averages to align with the individual benchmark numbers.

Fastmarkets’ pricing database has been updated to reflect these changes.

For more information or to provide feedback on this pricing notice, or if you would like to provide price information by becoming a data submitter to any ferro-chrome prices, please contact Claire Patel-Campbell by email at: pricing@fastmarkets.com. Please add the subject heading “FAO: Claire Patel-Campbell re: ferro-chrome pricing.”

To see all Fastmarkets’ pricing methodology and specification documents, go to: https://www.fastmarkets.com/methodology.

The post Amendment to publication date of two historic European charge and high carbon ferro-chrome benchmarks appeared first on Fastmarkets.

The data submission window had already closed, and data collection and the final price assessments were not affected.

The prices that were published early are as follows:
• MB-FET-0001 Ferro-titanium 70% Ti, max 4.5% Al, ddp Europe, $/kg Ti
• MB-TI-0002 Titanium scrap turnings, unprocessed type 90/6/4, 0.5-2% Sn max, cif Europe, $/lb
• MB-TI-0001 Titanium scrap turnings, unprocessed type 90/6/4, 0.5% Sn max, cif Europe, $/lb

For more information or to provide feedback on the early publication of this price, or to provide information by becoming a data submitter to this price, please contact Declan Conway by email at pricing@fastmarkets.com. Please add the subject heading “FAO: Declan Conway re titanium scrap and ferro-titanium prices.”

To see all Fastmarkets’ pricing methodology and specification documents, go to: https://www.fastmarkets.com/methodology.

The post Early publication of European titanium scrap, ferro-titanium prices appeared first on Fastmarkets.

For a company like physical commodities trader TELF, climate change presents a “once-in-a-century opportunity” to become part of a “megatrend” like energy transition, chief executive Nikolay Litvinenko told Fastmarkets in an interview.

“As a trading company, the key decision we are making is the portfolio of commodities we trade and the partners along the supply chain we are working with. And we are addressing it by changing the portfolio of commodities we trade,” he said.

“For example, for a significant part of our history, the company traded energy products – oil and coal. However, as fossil fuels have become increasingly unpopular, we gradually diversified away into metals trading, which today represents more than 80% of our business.”

This includes an increasing share of metals like cobalt, copper and nickel, which are vital to the energy transition. This means the company benefits from these trends and plays some part in energy transition and potentially reduces negative climate impact, according to Litvinenko.

The energy transition globally also has the potential to create more demand for ferro-alloys, he said, while countries look to develop the infrastructure further for offshore and onshore wind power. Beyond this, ferro-chrome’s heat-resistant and anticorrosive properties mean it plays a key role in the automotive and aerospace sectors, among others.

“Ferro-alloys, and our main high carbon ferro-chrome product in particular, are essential components in stainless steel, the production of which accounts for around 80% of ferro-chrome consumed worldwide,” Litvinenko said.

“As such, ferro-alloys can play a role in the development of lower carbon gas and nuclear power generation infrastructure, as well as offshore and onshore wind power infrastructure.”

The major challenge for the ferro-chrome industry, however, remains its ongoing reliance on coal power and other fossil-fuel based resources for production, along with its energy intensive nature.

“All major producers – South Africa, China, and Kazakhstan – rely on access to cheap coal-fired power to produce their products,” Litvinenko said.

“So decarbonization of the power supply is the key near-term target for ferro-chrome producers to reduce the sector’s carbon footprint. While there is a growing number of initiatives to bring more renewable energy into the mix, the industry will require significant investment to reduce its reliance on coal power gradually.”

TELF’s activities

For TELF, whose involvement in the ferro-chrome industry comes through its partnership with Kazchrome and whose activities include trading, off-take agreements, agency agreements and logistics, there is a role to be played as a facilitator in the green transition, Litvinenko added.

“We see our role as a supply chain facilitator in several respects,” he said. “First, we work with end consumers and pass through their feedback to the producers with regard to regulatory and user demands related to the quality of the commodities and their carbon footprint.”

Going in the opposite direction, Litvinenko said, the company channels information back to consumers about carbon footprint from commodities production, as a way to help them calculate their exposure.

In terms of the commodities in which TELF trades, he said, most of the metals are “highly recyclable,” and the company is “actively monitoring the secondary materials market” with a view to potentially entering the recycling business for its commodities at some point in the future.

For now, through its own activities, TELF acts as a cog in the machinery of the energy transition, by facilitating the trade of relevant commodities, such as cobalt, copper and nickel.

“In the long run, this shall reduce the global carbon footprint by reducing the role of the fossil fuels,” Litvinenko said.

“We [also] help producers of the commodities to access global markets and generate revenues that could be invested in new technologies reducing carbon footprint, for example, electric machinery, or solar or wind-powered mining operations.”

And the suppliers from whom TELF sources its material are also using various measures to help minimize the negative environmental impact of their activities.

“Such measures are increasingly important in the context of broadening stakeholder scrutiny of ESG (environmental, social, and governance) impacts taking place at all stages of the value chain. This includes a growing focus on the cross-lifecycle impacts of commodities themselves,” Litvinenko told Fastmarkets.

Kazchrome and Kazakhstan

“We monitor very closely our sources’ progress on environmental impact mitigation progress. For example, our key sourcing partner for ferro-alloys, Kazchrome, applies a range of international management system standards,” he added.

Kazakhstan-based Kazchrome, which is part of ERG and, according to its website, is the largest producer of high carbon ferro-chrome in the world, uses various international standards, such as ISO 14001 certification, which sets out the requirements for an environmental management system.

“[It also] implements a range of strategic initiatives to minimize its negative impacts and risks, such as upgrading air filters, application of enhanced air quality monitoring technology, ongoing waste reprocessing and recycling initiatives, and wastewater treatment, among others,” Litvinenko said.

As a country, Kazakhstan is a leading producer of ferro-chrome, with longstanding production and strong supply chains, which are “well-established, very efficient and well-managed,” according to Litvinenko.

The difficulty, however, is that Kazakhstan is a land-locked country, and it is therefore heavily dependent on neighboring countries to access seaports to move goods into export markets.

“So in the current turbulent geopolitical environment, it is not always easy, but we manage to ensure a stable flow of goods even in the most difficult times,” Litvinenko said.

But from a legal perspective, he added, the company does not view Kazakhstan as a difficult jurisdiction to operate, especially compared with some countries in Africa and Latin America.

“We believe that the overall investment climate in the region is improving and becoming even more favorable for foreign investors. And as a commodity-rich country, Kazakhstan has a lot of potential,” Litvinenko said.

Logistics

In terms of logistics and the selection of companies with whom it partners, the company applies a “robust compliance framework,” Litvinenko said, covering sanctions compliance, anti-bribery and corruption, counterparty due diligence, among other applicable legal and regulatory requirements.

“The framework has been tailored to focus on business activities that present higher levels of inherent compliance risk. We are constantly enhancing our due diligence processes, expanding the scope and including additional ESG risks,” he said.

There are challenges, however. Although TELF uses a “rigorous process” to select its partners, including thorough background checks and visits to providers’ facilities, because of the relative size of its operations and the specifics of supply chains, the company cannot currently afford to select service providers on the basis of ESG criteria, Litvinenko said.

He added that this is likely to be an issue for various commodities traders because commodities are often produced in areas of the world with limited basic infrastructure and a limited selection of local providers.

“For example, the DRC [Democratic Republic of Congo] produces around two thirds of global cobalt and a significant amount of copper. Most of these goods are being trucked out of the DRC to the export ports, which, as you can imagine, is not necessarily the most efficient way of transportation from an environmental perspective,” Litvinenko said.

“From an environmental and economic perspective, we would prefer using a railway, but it simply does not exist. And using electric trucks is probably a decade away, and, at the moment, it is also not a feasible option given the power supply issues in many countries along the way.”

In terms of sea freight, he added, the company has to compete for scarce container slots on large vessels in order to deliver commodities to its clients within required timeframes.

“We do note, though, and we welcome, that the shipping lines are increasingly focused on using less polluting fuels that shall improve the carbon footprint for the supply chain over time,” Litvinenko said.

Emissions

For itself, as a trader operating with a small workforce and physical footprint, Scope 1 and 2 emissions are limited, which means, because the company arranges delivery of the commodities it trades, Scope 3 accounts for almost 100%, Litvinenko explained.

“This reflects our extensive use of heavy transportation services, including shipping, railway and road transportation – as well as the significant environmental impacts associated with the commodities we trade,” he said.

“The managing process starts with an understanding of where you are. And this is not a simple question by itself, as there are no clear industry standards for measuring Scope 3 emissions yet.”

The company is now working with solution providers and advisers like CarbonChain, which creates technology aimed at enabling “data-driven climate action” in supply chains, to measure its Scope 3 emissions along its own supply chains.

The aim is to be able to assess better its own position and what can realistically be done, Litvinenko said.

“But for a pure play trader, which neither produces nor consumes commodities, it is not easy to impact either the upstream or downstream customer base,” he added.

Jurisdictional challengesBecause the company operates across a large number of different jurisdictions, there are also challenges in terms of legislative and regulatory requirements.

One of the main issues, Litvinenko said, is a lack of standardization and harmonization of the various requirements globally, making the compliance process less efficient.

“For a company of our size, it is not always easy. For example, we constantly monitor and manage geopolitical developments and sanctions risks, to ensure an uninterrupted commodity flow to our customers – as well as our own, ongoing legal compliance,” Litvinenko said.

“The nature of our business, as well as the geographical breadth of our activity, means we must ensure, on an ongoing basis, that we are in full compliance with all relevant sanctions and export controls. Our Global Sanctions and Export Controls Policy Sanctions Policy establishes a comprehensive and coordinated approach towards sanctions and export controls compliance.”

Currently, most of the requirements the company must meet are to do with reporting, and he added that TELF adjusts its reporting standards to new regulations.

“We hope that there will be a harmonization of rules and regulations in the future, making the compliance process more efficient,” Litvinenko said.

The post Climate change presents ‘once-in-a-century’ opportunity for commodities traders: TELF appeared first on Fastmarkets.

The specifications of the new price are as follows:

MB-FEC-0022 Ferro-chrome low carbon, 0.10% C, basis 60-64.9% Cr, CIF Europe, $ per lb Cr
Quality: Lump, Cr 60-64.9%, C 0.10%, Si 1.5% max, P 0.03% max, S 0.03% max
Quantity: Min 25 tonnes
Location: CIF Europe
Unit: USD per lb of chrome contained
Payment terms: 30 days, other payment terms normalized
Publication: Fortnightly, Tuesday, 2-3pm London time.

To provide feedback on this price, or if you would like to provide price information by becoming a data submitter to this price, please contact Claire Patel-Campbell by email at: pricing@fastmarkets.com. Please add the subject heading “FAO: Claire Patel-Campbell, re: low carbon ferro-chrome.”

To see all Fastmarkets’ pricing methodology and specification documents, go to: https://www.fastmarkets.com/methodology.

The post Launch of new European low carbon ferro-chrome price assessment appeared first on Fastmarkets.