Mar 20, 2020
EU steel cuts to weigh on ferro-alloys markets
Production halts across multiple European steel mills and logistical problems are causing volatility in the ferro-alloys market, with participants expecting prices to fall in the coming weeks.
Increased buying interest from steel mills in recent weeks had driven up the price of ferro-manganese and ferro-silicon, as consumers tried to build up stocks ahead of anticipated travel problems in Europe. But recent days have seen countries rapidly introduce more forceful measures to combat the coronavirus outbreak, leading to multiple steel mill closures.
ArcelorMittal, Europe's largest steelmaker, closed three furnaces at its plant in Dunkirk and two at Fos-sur-Mur, both in France. ArcelorMittal France produced 6.8mn t of crude steel last year. The plants produce large volumes of steel tailored to the automotive market, using ferro-chrome, ferro-molybdenum, ferro-manganese and nickel to strengthen and improve durability. Market participants said they expect an increase in spot availability in these materials, depending on the length of production halts.
The restart of ArcelorMittal Krakow, which had been expected in mid-March, has been postponed indefinitely. The plant — idled in November because of import pressure from international suppliers — was one of Poland's largest buyers of ferro-alloys. It regularly entered the spot market for ferro-molybdenum, ferro-niobium and ferro-vanadium and purchased manganese alloys from French producer Eramet.
Closures have also been announced at Italian long steel producer Feralpi and AFV Beltrame's mills in France. Long products, mainly used in construction, contain varying amounts of ferro-vanadium and ferro-niobium to increase strength and corrosion resistance. Almost all contain some manganese.
One ferro-alloy producer in France said there were currently no plans to alter output, despite cancelled deliveries, because they expect a surge in demand when quarantine measures end.
When the plant closed in November, a trader in Poland said they received offers from Eramet where they had not before. So far, there has not been any extra availability of manganese alloys, and prices for high-carbon ferro-manganese and silico-manganese actually increased on greater buying. But market participants expect this to be a temporary increase in demand, with the effects of steel mill closures now expected to emerge in the weeks ahead.
Aperam, one of Europe's largest stainless steel producers, also announced halts at its European sites. Stainless steel usually contains 10-30pc chromium and most mills use either charge or ferro-chrome. Prices for high-carbon ferro-chrome fell to 77-85c/lb ddp yesterday from 77-87c/lb on 17 March on the prospect of lower demand from European steel mills.
Some large producers have not ordered any halts. Thyssenkrupp and Saltzgitter — which both purchase several thousand tonnes of manganese flake each quarter and a range of ferro-alloys — have not closed any plants to date. Germany has quarantine measures in place and there are queues at several of it border crossings.
The closures come in response to a wave of production halts at carmakers in Europe. PSA group, Volkswagen and Fiat Chrysler, the three largest producers, all halted operations at several factories early in the week. Low demand in other sectors also impacted the decision.
A ferro-alloys trader said shutting furnaces was a "catastrophe" for the steel industry after a year of closures and low delivery volumes in 2019. Import pressure from international competitors, low prices and high energy and emission charges combined to weaken EU producers.
In January, before the coronavirus crisis hit Europe, European steel association Eurofer warned of the challenges facing EU steel mills.
"While some growth is expected to return to steel markets in 2020, even these modest estimations could be upended if events take an unexpected turn," Eurofer director-general Axel Eggert said.
