EU bulk alloy prices rise on high demand, tight supply

Bulk alloy prices in Europe have moved steadily higher in recent weeks, with three of the five major alloys moving to multi-year highs as exceptionally high demand coincides with tight supply in the continent's warehouses.

Prices for high carbon ferro-manganese have hit their highest level since January 2009, at €1,400-1,460/t ddp, with spot demand surging in recent weeks. Likewise, silico-manganese prices are currently at their highest point since November 2008, at €1,400-1,460/t ddp. Ferro-silicon prices are at €1,650-1,700/t ddp - just below the June 2008 high of $1,650-1,800/t ddp, the assessment's highest level since it was launched.

Most market participants expect these levels to be sustained in the near term, mainly because demand from the steel industry has been unusually high for the time of year as mills push to recover lost lockdown volumes and operate at relatively brisk rates throughout summer. The demand recovery has jolted the ferro-alloy supply chain that had adapted to sluggish demand dynamics in the fourth quarter of 2020 and early 2021. And with European warehouses now holding insufficient volumes relative to requirements, buyers have been even more proactive in attempting to lock in additional spot shipments, further amplifying the sense of demand and injecting heat into the market.

"The main challenge is the supply side," a ferro-alloy producer said, adding that "no one has material" and they themselves are "really worried about the security of supply", trying to source additional material from overseas in case it is needed to fulfill contracts. "It is hard to get precise [demand] outlooks from customers. They just say demand is good and ask for more," they said, adding that this lack of clarity is further fuelling supply concerns.

Many European ferro-alloy producers are currently sold out and unable to offer in the near future, and trading companies are unable to secure extra ferro-silicon and ferro-manganese shipments until September, market participants said. Furthermore, imports of several alloys have been scarce for some time, with Brazilian ferro-silicon in short supply and a Covid-19 outbreak in Sarawak disrupting availability from Malaysia.

The lack of availability means spot liquidity has been patchy during the latest rally, and price indications for some products at times have diverged widely as market participants attempted to gauge a volatile market from different vantage points. Sellers continue to test the European market with higher offers, with some now seeking more than €1,550/t ddp for high-carbon ferro-manganese and silico-manganese, while ferro-silicon has been offered at €1,750/t ddp in Spain. Enquiries from Asia and Russia have also started to pick up, having been scarce so far this year, market participants said.

Ferro-chrome enquiries pick up

While much of the interest in bulks has been directed at carbon steel, enquiries from the stainless steel industry are also now picking up.

"A few customers who walked away from me previously have now come back and are asking for higher quantities," a ferro-chrome trading firm said. Others have said they are receiving a growing number of enquiries from buyers for spot tonnages of above 200t.

Meanwhile, ferro-chrome shipments from Asia and South Africa have been subject to more severe delays recently, putting further strain on buyers' inventories. And 18 months of reduced manufacturing activity globally has tightened scrap supply, meaning some stainless steel producers need to use more virgin raw materials, further pushing up demand for ferro-chrome, a stainless steel producer said.

European prices for high carbon ferro-chrome in recent weeks have held steady at $1.13-1.27/lb ddp, supported by rising prices from India and strong demand from Europe's stainless mills. Prices usually start slipping in June-July as spot trade wanes and industrial activity slows for the summer, but the unusual rhythm of demand this year amid Covid-19 has meant prices so far are bucking their typical seasonal trend.

By Yusuf Khan