With a large cross section of the international ferroalloys industry gathered this week in Singapore for Metal Bulletin's 17th Asian Ferroalloys Conference, a recurring message from attendees is that the supply pipeline has broadly emptied out and prices are off the bottom.
The one piece missing from the recovery jigsaw is the lack of evidence that demand for ferroalloys from the global steel industry has recovered.
"It's entirely supply-led and that's all I can say," said a source from a large South African charge chrome producer.
"But we're still waiting for the recovery in demand," the source added.
That sentiment applies equally to ferrosilicon and manganese alloys.
While offtakes on annual contracts have been consistent, steel mills have asked for much smaller volumes to date this year than in 2015 -- as little as half in some cases.
"Yes, the steel mills all came in for smaller quantities this year," said a US trader. "But they've been taking the quantities this year; nothing more, noting less, unlike last year's offtakes, which were poor."
However spot demand has generally been minimal across all regions, according to several sources.
Those looking to come away from the event with a clearer direction on ferroalloys prices may be disappointed, said a Malaysian ferroalloys producer source. "People will leave with more questions than answers," the source said.
Conference participants interviewed by Platts were unwilling to predict when a recovery in ferroalloys demand from steel mills would emerge.
"We're hoping it will come later this year, but it is really hard to make such a prediction with any degree of certainty," said the US trader.
It was a view echoed by many. Sources agreed that any upturn in demand while the supply pipeline remains empty is likely to produce an explosive response in raw materials pricing.
"Look what's happened in manganese ore," said a Taiwan-based trader. "Port stocks in China have fallen dramatically and the Chinese have panicked and started buying, producing a big response on the price."
Manganese ore prices have almost doubled since the start of the year.
The Platts assessment for high-grade manganese ore (44% Mn) stood at $4/dmtu last Friday, up from $2.10/dmtu at the start of this year. Last week's assessment was the highest since February 6, 2015.
The Platts assessment for the lower-grade 37% Mn ore was at $3.90/dmtu last Friday, up from $1.80/dmtu at the start of the year. The assessment was at its highest since the start of 2015 when it was assessed at $3.70/dmtu.
CONCERN AMONG SUPPLIERS
The rapid increase in manganese ore prices is causing concern among some suppliers rather than consumers. Most of the increase came in the third week of March, when the 44% Mn assessment soared to $4/dmtu from $2.90/mtu a week earlier.
"There's a real risk the Chinese will not perform on the contract if the price falls," said the producer source. "It's happened before and the Chinese just don't care. If the price falls, the L/C [letter of credit] won't come. Until you've got the L/C, you can't be certain the buyer will perform," he added.
With March and April cargoes sold out, cargoes for May loading were now being sold, the source said.
"For a cargo loading in the last week of May, you're not going to get the L/C until the second week of May," the source said. "And if the price goes down between the time of a transaction and the time when the L/C should be issued, there's a real risk the L/C won't get issued."
Market participants have suggested some sort of correction is possible on manganese ore prices after such a rapid, steep gain.
MANGANESE PRODUCTS PRICES SLOWER TO RESPOND
Despite the upward pressure on the manganese ore market, prices of manganese alloys and electrolytic manganese have been slower to respond.
Silicomanganese prices have seen upward pressure in China and Chinese buyers have started buying the alloy to import.
The CFR Japan price was assessed at $850-$950/mt Thursday, up from $800-$850 last Thursday and $620-$640/mt at the start of January.
In the US, the response has been even slower, with the market assessed at 38-40 cents/lb Wednesday, in-warehouse major US hubs, unchanged from a week earlier but up from 35-38 cents/lb at the start of the year.
The price of electrolytic manganese metal flake (99.7% Mn) has also been slow to respond to higher ore prices, with the FOB China price flat at $1,500- $1,550/mt in March and up from $1,460-$1,510/mt at the start of the year.
But a Chinese electrolytic manganese producer said there were signs the market was firming in China, Japan, Europe and the US.
"I think you will start to see some upward movement on the FOB China price very soon," the producer source said.
One note of caution about the supply pipeline on manganese alloys remaining empty before a demand recovery came from a South African manganese producer source. "We just need to be careful that the new production coming on stream in Malaysia doesn't tip the balance again before demand picks up," the source said.
CHINESE FERROSILICON TIGHTNESS SEEN
Ferrosilicon has seen similar trends on the supply side, according to market sources. A Malaysian producer source said it was becoming harder to source ferrosilicon from China.
"The Chinese are producing 220,000 mt/month of ferrosilicon, but this time last year they were producing 400,000 mt," the producer source said. "At the same time, Chinese steel production is down about 5%, so there is a shortfall of 100,000 mt/month of Chinese ferrosilicon."
Because of that, "prices should rebound in China," the source added.
The source said the reduced supply emerging from Vietnam was due to the tighter availability of ferrosilicon from China. Vietnam has no production of its own, but resells Chinese ferrosilicon smuggled through Vietnam to evade the 25% export tax China has applied to ferrosilicon exports since 2008.
Despite the "carnage" of 2015, the number of bankruptcies in the steel and ferroalloys sector has been lower than many expected.
"Three ferrochrome producers in South Africa are in bankruptcy or financial rehabilitation, Essar Steel Algoma in Canada is in bankruptcy rehabilitation, as is US Steel's Canadian operations, and that's really it so far," said the US trader.
"I'm not saying there won't be others. But at the end of last year, given the extent to which everyone's balance sheets were stretched to the limit, I would have thought the number would have been much, much higher," he said.
