Viewpoint: US noble alloys outlook mixed

Raw material prices are expected to prop up most noble alloy markets in the second half of 2017. Prices for ferro-vanadium are expected to move up in line with higher alloy production and replacement costs. Oversupply and falling scrap prices are projected to undercut ferro-titanium. Meanwhile, ferro-molybdenum prices will track offshore alloy and oxide prices, which in turn will move up late in the year.

Ferro-vanadium

Demand from domestic steel mills is widely projected to remain firm through the end of the year. Several oil country tubular goods orders as well as generally higher output will encourage demand in the latter half of 2017. Mills are expected to keep pace and consume nearly all their contracted allotments in the third and fourth quarters but require only occasional spot market purchases. Market participants expect prices to rise on the back of recent curtailments in Chinese pentoxide production, which would bring the market closer to alloy replacement costs, instead of trading below spot market values like it has this month. Renewed interest for US alloy from European traders is projected to lift domestic the domestic market, particularly as some suppliers withhold near-term offers.

Ferro-vanadium prices are projected to move up by 12-15pc by the end of the year driven by offshore vanadium pentoxide. Higher alloy import prices will lift trader and distributor costs and this is expected to send US prices higher, particularly after the completion of mill maintenance late summer.

In the first half of the year, ferro-vanadium (V 78-82pc) traded in a narrow range until April, when it started to climb. Prices peaked at $12.80-13.00/lb in early June. Prices declined by 7pc thereafter and bottomed out at $11.90-12.10/lb late in the month as suppliers lowered offers to secure some spot business.

Ferro-titanium

Imports of ferro-titanium are expected to outweigh demand in the second half of the year. North American capacity utilization rates at the ferro-alloy's production facilities will remain high, in part supported by strong demand from Asian and US steel production. Lower-priced eastern European and Russian alloy is projected to make its way into the US market, despite mostly being consumed by European mills through early July. Scrap prices are expected to drop by September and in turn place downward pressure on ferro-titanium.

These factors are expected to cause a 10-12pc drop in ferro-titanium prices. Imports are expected to weigh on prices early in the second half, with steady demand supporting prices in the last months of the year.

Ferro-titanium prices (Ti 70pc) rallied gradually in the first six months of the year. Prices rose by 37pc between the start of the year and its peak of $2.19-2.28/lb in early June. Gains were primarily the result of higher scrap costs, reduced imports and suspended production at one facility.

Ferro-molybdenum

Healthy demand from carbon and stainless steel mills is projected to keep ferro-molybdenum prices steady for most of the second half of 2017. Spot market trading will remain sporadic because steelmakers are well-supplied by annual contracts. Increased stainless steel production in China will support offshore oxide prices, but gains will be limited by strong output at mines. As a result, ferro-molybdenum prices are expected to closely reflect European and Chinese oxide and alloy markets.

Prices are projected to rise by as much as 5pc in the last six months of the year. The market anticipates on-and-off declines as mills perform summer maintenance and supplier stocks outweigh demand in the early months. Still, renewed demand and higher raw material prices could support prices in the fourth quarter.

In the first half, ferro-molybdenum prices (Mo 65pc) rose early and peaked at $10.65-11.00/lb in April, lifted by slim inventories. Easing supplies and weaker molybdenum oxide markets pressured prices down by 19pc to a low of $8.70-8.85/lb at the end of June. Oversupply and relatively minimal demand have caused further drops in prices this month.