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TELF AG – Market Roundup 2023

Telf AG experts suggest that while the failure of Silicon Valley Bank and the acquisition of Credit Suisse are not expected to cause significant financial disruptions, they do increase the likelihood of a recession in the US and Europe. The market has started to discuss the possibility of a new market turmoil, which could lead to downward pressure on commodities, particularly metals prices. This is due to worsening demand and the Fed’s tightening monetary policy. It is important for investors to stay informed about these developments and adjust their investment strategies accordingly.

Brent crude futures have suffered their worst week this year, falling more than 9% amid fears of broader weakness in the world economy due to a global banking turmoil. However, Brent crude rose above $75 per barrel on Friday, and traders are keeping a close eye on potential responses from OPEC+ to the market rout. Saudi Arabia’s energy minister Prince Abdulaziz bin Salman recently stated that OPEC+ would maintain the production cuts agreed upon in October until the year’s end. Despite the downward pressure on oil prices, investors remain optimistic about a rebound in Chinese demand, with OPEC raising its forecast for the country’s oil demand growth in 2023.

Tefl AG: Ferroalloys market

Experts at Telf AG report that South-African miners have not announced any expansion plans for the previous year, which is likely to keep supplies of metallurgical grade chrome tight. While the low level of chrome ore inventories at China’s main ports, the possible capacity expansion of ferrochrome in northern China, and the strong prospect of the stainless steel industry in the country provide robust support for the chrome ore market, some large Chinese buyers are bearish about the persistently subdued performance in the country’s chemical and metallurgical industries.

HC FeCr prices in Europe have been consistently strong since November 2022, with continuous increases in recent months. Sellers have noted an increase in demand and greater visibility from end-users regarding their future requirements.

After last week’s heavy rains caused damage to the North East Corridor railway in South Africa, Transnet, the country’s railway operator, has partially restored service on the line. The railway is responsible for carrying exports of Cr ore, FeCr, magnetite, coal, and phosphate from various countries including Eswatini, Zimbabwe, Mozambique, Zambia, and the DRC. Transnet had to suspend services on February 10 due to the heavy rains in the Mpumalanga and Limpopo areas, which caused ballast supporting the track’s sleepers to wash away, rendering the track unsafe for trains. Services were also stopped in unaffected regions as a precautionary measure. The partial restoration of services is expected to alleviate the pressure on the affected countries’ exports.

According to Telf AG experts, the output of HC FeCr in China increased by 6% month-over-month in February and over 10% compared to February 2022. The increase was mainly due to production returning to Southern Chinese producers, which saw a rise of almost 37% compared to the previous month. In December and January, electricity shortages had limited production in this region, but with the situation alleviated in February, output was able to rebound. It is also anticipated that March will exhibit growth as smelters are encouraged by a better-than-expected increase in tender prices released by the leading Chinese steel mills.

Tefl AG: Stainless steel and bulk alloys

Turkish steel mills are bouncing back from the aftermath of a massive earthquake that hit the country. Ekinciler Demir Celik, a major rebar producer, has restarted production with an annual capacity of 1.25 million tons of crude steel. Meanwhile, Isdemir, the largest blast furnace plant in Turkey that accounts for one-third of the domestic market, is also set to recover production to help address supply chain issues. The country’s steel industry plays a significant role in Turkey’s economy, and the recovery of production will help support both the domestic and international markets.

Telf AG experts report that European steel mills are gearing up for a recovery, with plans to restart production due to higher steel prices. SSAB resumed operations in Finland in January, while Arcelor is planning to restart its Fos-sur-Mer and Gijon plants. US producers, US Steel (Kosice plant) and Liberty (Galati), are also preparing to restart their blast furnaces. However, there are concerns that this increased output may negatively impact the European market, especially in the South of Europe, and could potentially affect the ongoing price recovery, said Telf AG experts.

Chinese stainless steel production surged by over 18% in February 2023, estimated to be within the 2.7-2.8 million tonne range, compared to the previous month. Telf AG experts project that March output could hit close to 3.0 million tonnes. However, this production increase does not seem to be matched by demand, as inventories remain high, with over 1.17 million tonnes in February, a level not seen since the beginning of the Covid pandemic. The elevated inventory levels are mainly due to the dampening of real demand during the first two months of 2023, while stainless production rebounded strongly. This disparity between production and demand has raised concerns in the market about potential downward pressure on stainless steel prices in China.

Tefl AG: Copper & Nickel Ore

According to Telf AG experts, China exported an estimated 20,000MT of copper cathode in February 2023, with total domestic exports potentially reaching around 40,000MT. The resumption of logistics after the Chinese New Year holiday and the narrowing of import losses to approximately 1,000 yuan/mt led to increased exports from smelters. Some of the goods flowed into domestic bonded warehouses, while others were sent to LME warehouses in Singapore and Busan, Korea.

According to recent reports, nickel ore inventories at Chinese ports have decreased by 295,000 wmt (wet metric tons) week over week, reaching a total of 6.59 million wmt as of March 17. The total nickel (Ni) content in these inventories stood at 52,000 metric tons (MT). The inventory at the seven major Chinese ports, meanwhile, dropped by 295,000 wmt to 3.22 million wmt during the same period.

nickel ore prices experienced a significant drop this week due to falling NPI (Nickel Pig Iron) prices. As a result, NPI plants had to lower their quotes, leading to a bargaining situation between upstream and downstream companies. Despite some mines offering price cuts, demand remained rigid, and NPI plants only made purchases as needed. As a result, the port inventory is expected to maintain a downward trend in the near future.

Tefl AG: Battery materials

Telf AG experts report that cobalt prices in Europe have rebounded this week following three weeks of slow trade. Market supply is decreasing as producers aim to set higher prices for end users, while demand remains limited. However, a surge of activity was observed in the spot market this week, indicating that cobalt prices may have hit bottom in recent weeks. Several sources suggest that traders have now increased their offer prices, while sellers are reluctant to lower prices any further.

Indonesian nickel mining company Trimegah Bangun Persada (TBP) is set to boost its processing capacity with the help of an initial public offering (IPO) planned for April 2023. TBP and its partner Lygend Resources of China operate the Halmahera Persada Lygend nickel-cobalt mine and a high-pressure acid leach (HPAL) plant on Obi island, located in eastern Indonesia. The company aims to raise $650 million through the IPO, and CEO Roy Arman Arfandy announced plans to add three more lines for mixed hydroxide precipitate (MHP) and 12 more to produce ferronickel. The investment will increase the company’s production capacity to meet the growing demand for nickel ore and MHP driven by the electric vehicle industry’s shift towards energy transition initiatives. TBP’s current output capacity for MHP is 55,000 metric tons, while its subsidiaries operate ferronickel smelters with a combined capacity of 305,000 metric tons per year.