Jessica Long, Author at Fastmarkets https://www.fastmarkets.com/about-us/people/jessica-long/ Commodity price data, forecasts, insights and events Mon, 09 Dec 2024 15:25:12 +0000 en-US hourly 1 https://www.altis-dxp.com/?v=6.4.3 https://www.fastmarkets.com/content/themes/fastmarkets/assets/src/images/favicon.png Jessica Long, Author at Fastmarkets https://www.fastmarkets.com/about-us/people/jessica-long/ 32 32 Five challenges in China’s journey toward sustainable ferro-alloys https://www.fastmarkets.com/insights/five-challenges-chinas-journey-toward-sustainable-ferro-alloys/ Mon, 09 Dec 2024 15:25:09 +0000 urn:uuid:4afcf748-dc95-4fe6-9072-34417d6db46b There are five major challenges facing China’s green ferro-alloys premiums, multiple sources told Fastmarkets at the 40th International Ferro-alloys Conference held in Istanbul, Turkey, on November 10-12.

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Underdeveloped renewable energy facilities in China, difficulty in generating green power during cold weather, and weaker ferro-alloys exports from the country are some of the obstacles in the adoption of green ferro-alloys premiums, sources said.

But there are feasible solutions to promote green ferro-alloys production and green premiums in China, including accelerating the replacement of older ferro-alloy production capacity and increasing green energy usage in newly installed facilities at major production hubs, multiple sources said at the conference.

The production of ferro-alloys consumes a lot of energy and usually relies on coal, which can be highly polluting. Also, power costs constitute a large proportion of overall output costs. The green ferro-alloys industry intends to produce the material competitively with less energy and lower coke consumption.

In 2024, the Inner Mongolia Autonomous Region started requiring all highly energy-consuming ferro-alloys production capacity in the region to be shut down to promote industrial structure optimization and adjustment, sources told Fastmarkets.

Inner Mongolia also issued a notice in August 2023 on “Policies and measures to promote the high-quality development of the ferro-alloy industry,” which states that ferro-alloys producers must gradually increase their percentage of green power consumption and that production facilities that use at least 60% of green energy are not required to undergo mandatory capacity replacement.

Inner Mongolia is the biggest ferro-alloys production hub in China, with a total of 140 million tonnes of ferro-alloys output in 2023, accounting for almost 30% of overall production in the country.

“The more that [older] ferro-alloy production capacity in production hubs is eliminated, the higher the proportion of green energy usage will be,” a ferro-alloys trader told Fastmarkets at the conference. “And many provinces also announced [rules] to increase green power usage in adding new ferro-alloys production capacity, which will increase the overall renewable power application in the next couple of years.”

Accelerating the adoption of green steel premiums in the whole industry would add some momentum to the proliferation and acceptance of green ferro-alloys premiums, Fastmarkets heard.

“By the time ferro-alloys producers in China, or even around the globe, widely adopt green power, the green ferro-alloys premium will be accepted and will also be very meaningful in the ferro-alloys industry,” the trader said.

Fastmarkets’ green ferro-alloy prices in China consist of:

Weekly green ferro-chrome differential, ddp China, yuan per tonne
Weekly inferred green ferro-chrome prices, ddp China, yuan per tonne
Weekly green ferro-manganese differential, in-whs China, yuan per tonne
Weekly inferred green ferro-manganese prices, in-whs China, yuan per tonne

But some obstacles remain in the way of a large-scale uptake of green ferro-alloys and their premiums.

These include:

Underdeveloped green power facilities, peak-regulation capabilities

Renewable energy facilities and their peak-regulation capabilities — that is, their process of balancing power supply with the load on the power grid during peak and off-peak hours — are not mature enough to meet the requirements of the fast-growing green ferro-alloys industry, sources said.

Green power supply is volatile, intermittent and random, which may pose a big challenge to ferro-alloys production in Northwestern China and to green ferro-alloys premiums, a ferro-alloys source told Fastmarkets at the conference.

“Green power supply may not be able to provide enough stable power for ferro-alloys producers in Northwest China in the winter or in extreme weather conditions because green [energy in the region] mainly comes from wind, solar and photovoltaic power,” the source said.

Green steel premiums yet to be widely accepted

Green steel premiums are not yet widely accepted in the market, which may limit green ferro-alloys premiums since downstream demand for ferro-alloys comes from the steelmaking industry, Fastmarkets heard at the conference.

“Even though many steel mills are embarking on the decarbonization journey, I have heard that not many steel mills accept the green steel premium since it would be an increase over the non-premium steel price, and the steel market has [performed] quite poorly this year,” a second ferro-alloys source said.

“If downstream steel mills still [resist] accepting the green steel premium, how can we expect ferro-alloys buyers to adopt the green ferro-alloys premium? I suppose it may take quite some time for the whole steelmaking industry supply chain to adopt the green premiums,” the source added.

Fewer ferro-alloys exports to Europe, US

Chinese exports of ferro-alloys to Europe or the US have decreased in recent years due to anti-dumping duties enforced in those regions, which makes it less compelling to advocate for green ferro-alloys premiums, sources said at the conference.

“Despite the fact that European buyers are more concerned about whether the ferro-alloys they buy are green or low-carbon, there is one thing that cannot be ignored — not so many Chinese ferro-alloys products are being exported overseas now. Most Chinese ferro-alloys are consumed by domestic steel mills in China,” the second ferro-alloys source said.

“There is only one country that China sells ferro-alloys to, which is India. It now has a fast-growing demand for steel and ferro-alloys, but there is still a very long way for India to go green,” a third ferro-alloys source said at the conference.

Different scale, production technologies among Chinese ferro-alloys producers

China’s ferro-alloys facilities are largely scattered across several locations and production hubs, with different scales of production and technical specifications, making it quite difficult for Chinese producers to achieve a unified technological progress in terms of increasing the proportion of renewable energy usage, Fastmarkets heard at the conference.

“In the ferro-alloys industry, the leading ferro-alloys producers only make up a relatively small proportion of overall production. As a result, the green transformation – the adoption of green power supply among leading producers – will not have a big effect on the ferro-alloys industry as a whole,” a fourth ferro-alloys source told Fastmarkets.

Green power still uncompetitive despite low-cost advantage

Issues in the renewable energy supply, such as its volatility and intermittency, have prevented it from being scaled up in China in the medium and long term, so green power’s low-cost advantage has not been enough to compete with traditional fossil power sources, such as coal, sources said.

“Admittedly, green power costs are not as high as traditional fossil power costs, which could reduce overall costs in the production of ferro-alloys,” a fifth ferro-alloys source said at the conference. “But if you do the math, the utilization rate of green power is rather lower than traditional power like coal, especially in cold weather in Northwest China.”

“So far, the low-cost advantage has not been that evident or cost-efficient enough to make me adopt green power and the green ferro-alloys premium. Maybe it will still take time to promote green power and the green ferro-alloys premium and for ferro-alloys producers to accept them in light of all the obstacles in the way,” the source added.

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Bright spots for steel in 2025 spark recovery hopes for ferro-alloys markets https://www.fastmarkets.com/insights/bright-spots-for-steel-in-2025-spark-recovery-hopes-for-ferro-alloys-markets/ Fri, 15 Nov 2024 10:48:58 +0000 urn:uuid:f628c6d3-9f72-4242-b617-74ec23df55e4 Ferro-alloys markets will continue to be under pressure next year, but there are hopes of a market recovery due to improved steel demand, Fastmarkets ferro-alloys analyst Emre Uzun told delegates at the 40th international ferro-alloys conference held in Istanbul, Turkey on November 10-12.

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Price pressures for manganese alloys are set to ease due to improvements in steel production in 2025, Uzun said in his speech.

Manganese alloy prices jumped earlier this year on the curtailment of high-grade manganese ore supply from South32’s Groote Eylandt Mining Co (GEMCO) in Australia. But prices have come under pressure since the end of June on weak demand, Uzun said.

Fastmarkets’ silico-manganese 65% Mn min, max 17% Si, in-whs China price has fallen by 26.50% to 6,000-6,200 yuan ($835-863) per tonne on November 8 from a year-to-date high of 8,200-8,400 yuan per tonne on May 31.

Uzun predicted that manganese alloys prices will be slightly supported in 2025 with the recovery of steel production and improving sentiment since high stocks and lower prices have already led to some production cuts from manganese ore miners, which may help stabilize prices.

Crude steel production down in 2024

Global crude steel production in 2024 was down, but is poised for a gradual rebound in 2025, Uzun told conference delegates.

Market participants at the conference told Fastmarkets that China’s property market slump has lowered domestic steel demand, but the Chinese government’s recent stimulus policies may help support the steel market in 2025.

A raft of stimulus policies announced since the start of September this year, including lowering the one-year loan prime rate and reducing the reserve requirement ratio, have largely contributed to a rebound in China property market, sources said.

There is also cautious optimism for European output amid further rate cuts and demand recovery and the US steel market is also poised for a recovery, driven by easing financial conditions and infrastructure investment in 2025, sources added.

Ferro-silicon prices under pressure

Ferro-silicon prices will also likely remain under pressure, but rate cuts and economic stimulus could support a recovery in 2025, according to Uzun.

“Weak steel production weighed on Europe and China ferro-silicon market in recent months, but US ferro-silicon prices remained relatively stable due to trade investigations and tight supply,” a ferro-silicon trader source at the conference said.

China’s stimulus policies and the US Federal Reserve’s easing cycle may boost global market sentiments next year, Uzun predicted.

The same macroeconomic drivers of stabilizing construction and interest rate falls in China will boost vanadium demand in 2025, Uzun said.

“After the stimulus policies announced in September, we can obviously see the stabilizing signal in the property market and construction activities. Stabilizing downstream steel demand also means stable demand for upstream vanadium,” a China-based vanadium trader source at the conference said.

Uzun also forecasts similar interest cuts and potentially improving construction output in the US and Europe as supportive for vanadium demand from the steel sector in 2025.

Understand current steel price trends and access hundreds of historical steel prices in one place. Visit our dedicated steel prices page to find out more.

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Fastmarkets launches Chinese green ferro-alloys prices to cover whole clean steel supply chain https://www.fastmarkets.com/insights/fastmarkets-launches-chinese-green-ferro-alloys-prices/ Tue, 29 Oct 2024 12:16:47 +0000 urn:uuid:8fe66989-b317-4a30-a867-d21151081862 China’s ferro-alloy industry continues to track toward sustainable development, focusing on decarbonization as a foundation and utilizing renewable energy and advanced technologies to reduce electricity consumption, waste gas and slag.

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Having already laid solid foundations for economical production through previous decades of technological progress, green ferro-alloy producers and products are increasingly important in China due to a mix of market- and policy-driven incentives.

Ferro-alloys are essential ingredients for steelmaking and green ferro-alloys are now more in demand of downstream steelmakers aiming to realize policies to achieve a low carbon footprint for the steel supply chain. These moves are in line with China’s energy transition and targets for peak carbon emissions and carbon neutrality.

At least 10 ferro-alloy producers in China are now producing green products certified by the China Metallurgical Industry Planning and Research Institute (MPI), including ferro-chrome, ferro-manganese, ferro-silicon and silico-manganese. More producers are actively seeking official certifications, sources told Fastmarkets.

The green certification is awarded to ferro-alloy smelters in China that fulfil key criterion in energy intensity, electricity consumption, coke consumption, water recycling, water wastage, carbon emissions and allowable emissions concentrations.

This has also given rise to the question of green ferro-alloys pricing, where price differentials will encourage smelters to make more efforts in decarbonization and establish a healthy pricing mechanism for the market to recognize the contribution to sustainability.

It is amid this backdrop of the world’s largest ferro-alloys producer driving green ferro-alloy production that Fastmarkets launches four green ferro-alloy prices in China this week.

The assessments are as follows:

  • MB-FEC-0025 Green ferroalloy domestic, ferro-chrome 6-8% C, 50% Cr, differential to FeCr assessment, ddp China, yuan/tonne
  • MB-FEC-0026 Green ferroalloy domestic, ferro-chrome 6-8% C, 50% Cr, weekly inferred price, ddp China, yuan/tonne
  • MB-FEM-0008 Green ferroalloy domestic, ferro-manganese max 7% C, 65% Mn min, differential to FeMn assessment, in-whs China, yuan/tonne
  • MB-FEM-0009 Green ferroalloy domestic, ferro-manganese max 7% C, 65% Mn min, weekly inferred price, in-whs China, yuan/tonne

These price launches follow Fastmarkets’ recent launches for green steel prices for reduced-carbon hot-rolled coil in China and green rebar in Southeast Asia, reflecting Asia’s rise to compete in increasingly carbon-aware markets globally amid pressure from governments and state actors to reduce carbon emission levels, as well as to enter lucrative overseas markets.

Fastmarkets also publishing a green steel import differential to the CFR Vietnam HRC index, which focuses on Japan-, Korea-, Taiwan-origin HRC imports into Southeast Asia, as well as a weekly inferred green steel base price, hot-rolled coil assessment on a CFR Vietnam basis.

Green ferro-alloys premium ‘meaningful and has potential’

While there is presently no premium for green ferro-alloy products in China, ferro-alloy producers are heard to be looking actively into price differentials while still actively applying for green product certifications to remain competitive, sources said. This could give rise to a price premium for green ferro-alloys in the supply chain, they added.

Weak downstream markets and an oversupply of ferro-alloys are weighing on sellers’ ability to command a premium for even green ferro-alloys products.

“To my knowledge, the primary reason why the ferro-alloys producers did not widely accept the green ferro-alloys premium is because the weak downstream demand and the current ferro-alloys supply still slightly exceeds demand,” a China-based ferro-alloy trader source said.

“Currently, many ferro-alloys producers are thinking about how to digest their inventory since some ferro-alloys producers do not make that many profits,” a second China-based ferro-alloy trader source said.

Yet premiums for green ferro-alloys still have potential to grow alongside the increased introduction of them by alloy producers and acceptance among whole industry supply chain, participants said. This is especially so with major Chinese steelmakers already offering premiums of up to 800 yuan ($122) per tonne for reduced-carbon flat steel such as hot-rolled coil.

China’s State Council had stipulated previously in its Action Plan for Carbon Peak Before 2030, that by 2025, the share of non-fossil energy consumption should reach around 20% during the 14th Five-Year Plan period. By 2030, the share of non-fossil energy consumption should reach around 25% during the 15th Five-Year Plan period, sources said.

“Despite the fact that no premium is added to green ferro-alloy products now in China, the green and low-carbon development path is the right way to go and definitely the future trend in alignment with China’s overall action plan for carbon peak before 2030,” a third China-based ferro-alloy trader source said.

Especially, the premium will grow with the introduction of smelters on the high-quality development journey and the realization of increasing green steel premiums from end-user industries.

“The downstream steel industry is undergoing a green and low-carbon development, it is with great potential the upstream raw materials including ferro-alloys will go green and there will be a green premium added to ferro-alloys products. Otherwise, without green ferro-alloys, how will there be green steel?” the same third ferro-alloy trader said.

Follow the low carbon steel discussion and keep up to date with the developments influencing the decarbonization of the steel industry. Visit our dedicated green steel page here.

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Four reasons why China faces an unparalleled steel crisis https://www.fastmarkets.com/insights/four-reasons-why-china-faces-an-unparalleled-steel-crisis/ Mon, 16 Sep 2024 16:25:31 +0000 urn:uuid:5a4ec160-e7d1-4eab-973d-229cc53cd3bd Bearishness lingers in China’s ferrous market despite price rises seen for some steel products in recent days, market participants told Fastmarkets in the week to Wednesday September 11

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For instance, prices for major steel product reinforcing bar (rebar) have risen continuously during the week.

Fastmarkets’ daily price assessment for rebar domestic, ex-whs Eastern China was 3,120-3,140 yuan ($438-441) per tonne on Wednesday, up by 60 yuan per tonne from 3,060-3,080 yuan per tonne on September 6.

The latest assessment marks the third consecutive daily increase after steady declines since late August.

Despite this more positive performance of late, a bearish undercurrent remains in the Chinese steel market. Fastmarkets explores the four main reasons said to be behind this.

Negative outlook for Chinese steel demand

Market participants in China’s ferrous market told Fastmarkets that it is unlikely for steel demand to improve in the remaining months of 2024.

This is despite the fact that September and October are typically the peak months for steel demand in China – though this seasonal phenomenon has not been seen for several years due to the continued poor performance of the Chinese property sector.

It has been [commonly acknowledged] that ‘Golden September and Silver October’ for steel demand will not come.
Rebar trader source

China’s property sector has continued to struggle in 2024. For instance, sales among the top 100 property developers in the country declined by 2.43% month on month in August and were down by 22.1% from August 2023, according to a local industry research institute.

At the same time, China’s infrastructure sector, which market participants had held high hopes of boosting steel demand, has also disappointed.

Indeed, the country’s Ministry of Finance (MOF) recently urged local governments to restrict the local bond issuance for funding infrastructure projects from September 1 to reduce debt risk.

“Some local governments are experiencing fiscal deficits and they are having difficulties in paying for construction steel on time. The final payment of some contracts could be delayed by about one year,” another trader dealing with rebar said.

This weakened demand for steel products has made mills reduce their production, in turn cutting their demand for raw materials like iron ore, coke and ferro-alloys.

“The continuously sluggish and unimproved property market has directly led to a decrease in steel demand and lower steel mill tenders. A large number of steel mills across China have chosen to suspend their production and have facility maintenance during this summer,” a China-based vanadium source said.

“Less steel production means less demand for upstream raw materials, including ferro-silicon [and] vanadium. Many steel market participants or the upstream raw materials producers or traders hold quite pessimistic views on the steel demand at least in a near term,” the vanadium source added.

Trade defense cases against Chinese steel exports

Rising international trade protection measures against Chinese steel and downstream products have also put pressure on China’s ferrous markets.

Vietnam, a major buyer of Chinese steel products launched an anti-dumping probe into China-origin hot-rolled coil.

At the same time, Turkey has imposed a 20.56-57.75% tariff on HRC produced in China, while Canada will start imposing a 25% tariff on China-origin steel from October 15 and a 100% tariff on electrical vehicles from October 1.

“As the biggest supplier of steel product to the international market, Chinese exporters will either reduce export prices or reduce export volumes due to the trade cases. Both options will put pressure on steel mills,” an exporter in China said.

Fastmarkets calculated its steel hot-rolled coil index export, fob main port China at $448 per tonne on September 11, down by $18.67 per tonne from $466.67 per tonne on August 30, and down by $98 per tonne from $546 per tonne on September 11 2023.

An industry analyst noted that Chinese steel mill margins are currently negative, expressing concern that losses will grow if mills do not reduce production.

Market sentiment has also taken a hit from the recent trade cases, sources told Fastmarkets.

“I also heard some market participants have [expressed] concern over the China steel export market as we can see some direct or indirect anti-dumping investigation now and then. Even though those occasional investigations do not lead to a direct decrease in steel exports, it, more or less, has hampered market confidence,” a ferro-silicon source said.

Uncertainty about US economic policies

US economic policies, namely import tariffs or interest rate changes, also play an important role in driving prices for Chinese steel and associated upstream products, market sources told Fastmarkets.

China exports steel and downstream products like automotives and home appliances to the US, so the latter’s economic policies are critical to Asian steel market participants, sources added.

“Whether the world’s largest economy, the US, will raise import duties of steel and its downstream products will be key for the Asian ferrous market,” a second exporter in China said.

“[US presidential candidate] Donald Trump has been advocating for increasing import tariffs to bring manufacturing back to the US. If he wins the presidential election [in November], there might be higher import duties on steel,” a third exporter in China said.

During his presidency from 2017-2020, Trump imposed tariffs on Chinese steel and aluminium.

Besides this, following a slew of weak manufacturing and employment data from the US, investors are increasingly betting on the Federal Reserve cutting interest rates in September.

For example, the US manufacturing purchasing managers’ index (PMI) for August was 47.2, up by 0.4 from 46.8 in July, but the August reading marked the fifth consecutive month that the PMI was below 50 – the level that separates industry expansion from contraction, according to data from the Institute for Supply Management.

The increased expectations of a cut to US interest rates were said to be another cause for concern among ferrous market participants in China.

“The [rate cut] expectations caused a decrease in commodity prices in the Chinese futures market in the first week of September, and may put further downward pressure on commodity prices,” a second industry analyst said.

For instance, the most-traded January rebar futures contract on the Shanghai Futures Exchange (SHFE) declined for five consecutive days over September 2-6. The contract closed at 3,051 yuan per tonne on September 6, down by 236 yuan per tonne from 3,287 yuan per tonne on August 30.

The second industry analyst said market participants’ expectation for a cut to US interest rates was one of the main reasons behind the steel price drop during the first week of September.

Elevated ore and alloy stocks despite end of summer lull

Aside from the anemic demand from downstream industries, elevated stocks of ores and alloys in China has also worsened the bearishness tone in China’s ferrous market, according to sources.

Fastmarkets’ weekly assessment of manganese ore stocks at Qinzhou and Tianjin ports was 5.49-5.70 million tonnes on Monday, compared with 5.36-5.57 million tonnes on September 2.

Stocks are currently up by 21% from 4.57-4.67 million tonnes on July 29 and up by 28% from the 2024 low of 4.24-4.49 million tonnes reached on June 24.

“[Manganese ore stocks have] been rising for several weeks,” a manganese ore contact in China said, adding there is “no sign of a stop or fall, even though the summer lull is fading.”

Chrome ore stocks at China ports also increased last week, which further heightened the market participants’ concerns.

Fastmarkets’ weekly assessment of chrome ore inventories at the main ports of Tianjin, Qinzhou, Lianyungang and Shanghai were 2.29-2.49 million tonnes on Monday, compared with 2.10-2.15 million tonnes on September 2.

The latest assessment is 13% higher than the 2024 low, at 2.09-2.15 million tonnes on August 19.

“The higher chrome ore stocks are reasonable, given the increased exports of chrome ore from South Africa in July,” a chrome ore trader said.

Furthermore, stocks of ferro-alloys in China are also high, due to high capacity utilization rates and inactive restocking from the downstream steel industry, according to sources.

A second manganese alloy contact told Fastmarkets that silico-manganese stocks in the marketplaces of China were around 1 million tonnes on September 6, compared with a more usual amount of 600,000 tonnes.

Iron ore inventories at Chinese ports have also maintained an uptrend so far this year. A local industry information provider reported that major ports had 153 million tonnes of iron ore in their warehouses on September 6, up by 36 million tonnes from 117 million tonnes in the corresponding period of 2023.

Navigate the steel industry and make informed decisions with our global coverage of steel market news, price developments, market trends, forecasts and analysis. Find out more.

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China’s new rebar standards may deal another blow to domestic steelmakers https://www.fastmarkets.com/insights/chinas-new-rebar-standards-may-deal-another-blow-to-domestic-steelmakers/ Tue, 30 Jul 2024 08:38:09 +0000 urn:uuid:6a16b6d9-b645-4303-82a4-c12b20ef8e5d China’s revision of its national rebar standards, which is set to go into effect from September 2024, is expected to increase demand for vanadium nitrogen and silico-manganese amid a push for developing high-quality steel

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However, an increase in production costs for steel producers could potentially lead to a restructuring of the country’s rebar industry amid an ongoing real estate downturn, sources told Fastmarkets in the week ended Tuesday July 23.

Background

On June 25, China’s State Administration for Market Regulation announced new national standards for GB 1499.1-2024 and GB 1499.2-2024 plain round bar and reinforced bar.

The standards, which are revisions to those announced in 2018 and will be implemented from September 25 2024.

The new regulations will shift standards from recommendatory to mandatory. They will also adjust standards of tolerance, smelting, properties, package and implement stricter requirements on rebar quality.

For example, the tolerance for rebar with diameters of 6-12mm is 5.5% in 2024 standards, compared with 6% in the 2018 version. The tolerance for rebar with diameter of 14-20mm is 4.5%, compared with 5% in the 2018 version. For rebar with diameters of 22-50mm tolerance will be 3.5%, compared with 4% in the 2028 version.

“After the revisions in 2018, many large-scaled rebar mills had already gradually improved their steelmaking technologies and added alloys to meet the [quality] standards,” a contact at the China Ferroalloy Association said. “This time, with stricter implementation of the standards, only some small mills need to catch up.”

An industry source added, “The biggest change is the mandatory implementation of the standards. [Aside from this,] there will be both opportunities and challenges to full-scale implementation of the new [rebar] standards.”

In general, the policy is expected to be a net benefit to alloy and rebar markets, while there are still challenges and concerns worth addressing, a leading vanadium producer in China.

Opportunities

The strict implementation of new rebar standards is expected to boost demand for vanadium nitrogen and silico-manganese. It is also expected to lead to the creation of a premium for high-quality rebar products, according to market participants.

“Production of rebar with the new standards will increase per annum vanadium nitrogen consumption by roughly 15%,” the contact at the China Vanadium Association said. “That calculation is based on China’s 2023 rebar production volume.”

The vanadium producer added, “Even considering a possible yearly 10% cutback in rebar output amid the sluggish downstream property market, we, theoretically, project an additional monthly 900 tonnes of vanadium nitrogen consumption with the implementation of new rebar standard.”

The announcement of China’s new national rebar standards boosted confidence among vanadium market participants, which helped stop the downward trajectory of vanadium nitrogen prices, multiple vanadium sources told Fastmarkets.

“The current downstream vanadium market has been subdued and has witnessed no obvious improvement due to the sluggish property market. The new rebar standards will surely, to some extent, boost the demand for vanadium and increase the current lack of vanadium buying,” a China-based vanadium trader said.

Market participants indicated that the new standards are expected to improve demand for silico-manganese, albeit at a smaller degree than the vanadium market.

“No doubt, the new rebar standards will be good news for silico-manganese,” a China-based silico-manganese trader said. “There are still many rebar mills planning to use or add silico-manganese to fully meet the national standards.”

The trader source added that, “after the revised standard of rebar in 2018, the rebar yield pass percentage in China greatly increased, but there is still room to improve.”

“[The new standards will be] quite favorable for the silico-manganese market,” a second silico-manganese trader said. “However, the extent of the increase in demand [for manganese alloy] will be determined by the extent of the implementation of the standards.”

Market participants expected the implementation of the new standards to lead to higher production costs and diminished margins, which may prompt some some steel mills to reduce production rates temporarily before being able to pass on the increased costs to buyers.

“The oversupply will not be resolved by the implementation of new standards, but the downward pressure on prices will be slightly reduced,” a Shanghai-based rebar trader said.

Challenges

Subdued demand from end-use industries for rebar and the profitability of rebar mills when buying more alloys are expected to remain among the challenges facing the industry following the implementation of the new standards, sources told Fastmarkets.

“The expected increase in vanadium demand is based on unchanged rebar production,” the contact at the China Vanadium Association said. “However, the [possibility of] falling rebar output adds uncertainty to [how much vanadium demand will increase].”

According to China’s National Bureau of Statistics, the country’s rebar output in the first half of 2024 was 102.35 million tonnes, down by 11.7% year on year from 115.92 million tonnes.

“The rebar production in second half [of 2024] and beyond in China may continue to fall,” a manganese alloy producer said. “In other words, the increase of alloy demand following the new stricter standards may be diluted by the reduced rebar demand.”

In addition, the use of more vanadium and manganese alloy to meet the national standards will increase production costs for rebar mills, who widely have been running at tiny profit margin or even losing money, sources said.

“It will cost mills an additional 30-50 yuan per tonne to meet the mandatory standards,” the contact at the China Vanadium Association said. “The question then becomes: who is going to pay this additional cost? Steel mills or end users?”

A second Shanghai-based rebar trader indicated that it may be more likely for end users to absorb the increased rebar production costs.

“End users are suffering from thin profit, but they have to take the possible price rise to feed their daily consumption,” he said.

“The news of the new rebar standards…has been spread across vanadium market participants… it did help push up the weak vanadium price for some time, but later, the vanadium price still dropped since many market participants believed the revised rebar standards will not change the overall picture of declining downstream steel output,” a second China-based vanadium trader source said.

Actions

Trade houses actively destocked rebar in the preceding week due to their concern that 2018-standard rebar will not be allowed to be sold after September 25. The “panic destocking” caused prices to drop sharply, sources told Fastmarkets.

Fastmarkets’ daily price assessment for steel reinforcing bar (rebar) domestic, ex-whs Eastern China hit a 7-year low of 3,240-3,260 yuan ($446-449) per tonne on Thursday July 18 and then stopped declining in the following day.

Market participants expect the destocking of 2018-standard rebar will continue in coming weeks, albeit at a less frenetic pace.

Some rebar producers have announced that they will halt production of 2018-standard rebar from late July and start producing 2024-standard rebar.

“This will reduce the increase rate of market inventories of 2018-standard rebar,” the first Shanghai rebar trader said.

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Drop in Jan-May crude steel output in China drags down ferro-alloys markets https://www.fastmarkets.com/insights/drop-in-jan-may-crude-steel-output-in-china-drags-down-ferro-alloys-markets/ Mon, 24 Jun 2024 09:58:53 +0000 urn:uuid:cc682917-c18d-4e7d-bcd1-3b84aea7fb2f The decline in crude steel output in the first five months of 2024 dragged down Chinese ferro-alloys markets, including ferro-silicon and silico-manganese, sources told Fastmarkets on June 21

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According to data released by China’s National Bureau of Statistics (NBS) on June 14, production of molten iron in January-May reached 361.13 million tonnes, a 3.7% drop on a yearly basis, and production of crude steel totaled 438.61 million tonnes, down by 1.4% in the same comparison.

Ferro-silicon

The drop in crude steel output put pressure on the Chinese ferro-silicon market because ferro-silicon is a raw material mainly used by the steelmaking industry.

The most-traded September ferro-silicon futures contract in the Zhengzhou Commodity Exchange closed at 7,118 yuan per tonne on June 20, down by 4.17% from 7,428 yuan per tonne on June 3.

“The declining ferro-silicon futures, to some extent, indicated market participants’ weak confidence given unimproved demand for ferro-silicon due to the lower crude steel output in the first five months,” a China-based ferro-silicon source said.

Fastmarkets’ price assessment for ferro-silicon, 75% Si min, in-whs China was 7,400-7,500 yuan ($1,019-1,033) per tonne on Wednesday June 19, narrowing downward by 200 yuan per tonne from 7,400-7,700 yuan per tonne a week earlier.

Fastmarkets’ price assessment for ferro-silicon, 75% Si min, export, fob China was $1,330-1,350 per tonne on Wednesday, narrowing downward by $30 per tonne from $1,330-1,380 per tonne a week earlier.

And Fastmarkets’ price assessment for ferro-silicon, 75% Si min, cif Japan – which covers Chinese material shipped to Japan – was $1,340-1,360 per tonne on Wednesday, also narrowing downward by $30 per tonne from $1,340-1,390 per tonne a week earlier.

Crude steel output in May was 92.86 million tonnes, which was up 2.7% year on year, according to NBS data.  

“A single month’s crude steel production increase cannot compensate for the first five months’ decline, which negatively impacted the upstream ferro-silicon market,” a China-based ferro-silicon trader said.

Silico-manganese

The silico-manganese price in the Chinese spot market also fell in the week to Friday with bearish sentiment linked to the drop in crude steel output.

Fastmarkets’ weekly assessment of silico-manganese 65% Mn min, max 17% Si, in-whs China was 7,600-7,900 yuan per tonne on Friday, narrowing down from 7,600-8,000 yuan per tonne on June 14.

“The sentiment cooled in both futures and physical market of silico-manganese after January-May crude steel data was released, especially with the reduction in rebar output,” said one manganese alloy smelter.

Silico-manganese is added during the steelmaking process for desulfurization and deoxidization purposes.

In addition to the reduced demand from the steel industry, high supplies of silico-manganese further affected the market, according to market participants.

A silico-manganese trader source told Fastmarkets that Chinese silico-manganese output in May was around 810,000 tonnes, compared to 750,000 tonnes in April.

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China pushes for lower energy consumption and carbon emissions with steel production cuts https://www.fastmarkets.com/insights/china-pushes-for-lower-energy-consumption-and-carbon-emissions-with-steel-production-cuts/ Thu, 20 Jun 2024 09:04:06 +0000 urn:uuid:7f1dc8ae-3657-49e9-8599-0cba19a277ef Chinese domestic authorities are in discussions to implement tighter targets on crude steel production across the country, in a bid to reduce energy consumption and carbon emissions, Fastmarkets understands

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The Fujian provincial government issued a notice to local steel mills on June 18 stating that it will enforce crude steel production cuts between June and December this year, with output not to exceed an annual capacity of 35.98 million tonnes.

Crude steel output will be no higher than 30.58 million tonnes in 2024, according to the notice.

Fujian province, in southeastern China, produced 34.06 million tonnes of crude steel in 2023, ranking it tenth among the leading steel production hubs in China.

Output in the first five months of 2024 was about 14.64 million tonnes, up 23% year on year, according to data from the National Bureau of Statistics (NBS).

If the policy is implemented, crude steel production in 2024 will be 3.48 million tonnes lower than the previous year.

The most-affected steel mills will be those running blast furnaces (BFs) because of their high carbon emissions, according to market participants.

Electric-arc furnaces (EAFs) will be prioritized to ensure good production rates, according to the notice.

Production cuts considered by other Chinese provinces

Other larger production hubs, such as Shandong and Hebei provinces, published notices about reducing energy consumption and carbon emissions, and containing crude steel production early in 2024, but did not specify by how much production will reduce.

One trader based in Shanghai told Fastmarkets that production targets in Hebei province are expected to be lower than the annual production volumes in 2022, which were significantly lower than those in 2023.

“There is going to be stronger pressure on supply reduction in the second half of the year, given the tighter production targets,” an iron ore trader based in Beijing said. “Nonetheless, first-half 2024 production volumes have not been very high, so steelmakers technically have some flexibility in planning their production schedules.”

Magnitude of cut matters

“We are hearing some production-cut plans for the year [across Chinese regions], but the size of the cuts [for the whole country] remains unknown,” a steel industry analyst based in Hangzhou told Fastmarkets.

According to recent market speculation, the cuts could amount to around 20 million tonnes, according to the Hangzhou-based analyst. This compares with China’s 1.02 billion tonnes of crude steel output in 2023, so is unlikely to boost the steel market in the second half of the year.

But a production cut of just over 20 million tonnes is likely to hit prices of key steelmaking raw material iron ore. As a result, lower iron ore prices could pull prices for finished steel lower.

A larger cut – potentially doubled to 40 million tonnes – would flip the finished steel market into short supply. This would push prices for both steel and raw materials higher, according to the analyst.

But no matter the scale of the production cut, hot-rolled coil prices are likely to benefit because Hebei province, which is China’s biggest steel-producing province and accounts for the lion’s share of HRC capacity, will take a lead in reducing production, the Hangzhou-based analyst noted.

“HRC demand is less susceptible to seasonal factors. Besides, demand [for the flat steel product] is set to be underpinned by exports and a potential pick-up in infrastructure construction [following Beijing’s stimulus measures] in the remainder of the year, the analyst said.

“Resilient demand, coupled with a possible supply cut, will lower HRC inventories in the third quarter of the year and bolster prices in the second half of the year,” the analyst added.

Opinions in iron ore market divided

Most iron ore market participants adopted a wait-and-see attitude towards the news of Fujian province’s crude steel cut regulations, due to the lack of official announcements from other larger steelmaking hubs in China.

“The crude steel cut target started from Fujian province because its production in 2023 increased the most – up by 13.7% – and the 2024 crude steel cut amount as announced [for Fujian province] is actually a bit high,” a Beijing-based mill said.

Some market sources suggested that further crude steel production cut targets are likely to come from provinces that recorded relatively high year-on-year increases in production last year.

In 2023, the crude steel output in 11 provinces across China increased from the previous year by more than 500,000 tonnes per province. The largest volume increases were above 1 million tonnes per province, notably from Fujian, Inner Mongolia, Jiangsu, Anhui and Guangdong, according to NBS data.

Sentiment among market participants was not overly bearish in the iron ore derivatives market, despite expectations that the crude steel production cuts in the second half of the year would dampen iron ore demand.

“There hasn’t been any official file about crude steel target in Hebei province, or other large provinces. Most industry sources would prefer to wait for more announcements,” one mill source from Jiangsu province told Fastmarkets.

A Singapore-based trader noted that a few steel mills in Hebei province were heard to be conducting BF maintenance plans, while a large mill in Jiangsu province was maintaining normal production.

“The expected crude steel cut might be higher than the market expects given the Chinese government’s pressure from the decarbonization targets and continuous weak steelmaking margins in China,” the Singapore trader added.

“But in the short term, market participants will buy the crude steel cut story only when actual output starts to decline continuously,” a Shanghai-based analyst told Fastmarkets.

In May, China’s production of crude steel was 92.86 million tonnes, a year-on-year rise of 2.7% and the highest level since March 2023 when it was 95.73 million tonnes, according to the data from NBS.

In the first five months of 2024, China’s crude steel production totaled 438.61 million tonnes, down by 1.4% year on year.

Impact on coking coal market hard to predict in short term

Coking coal market participants suggested that the impact on the coking coal market was hard to predict at present.

“Currently, I don’t see any obvious impact in the near term,” one international trader based in Southern China told Fastmarkets.

“We originally expected the Chinese domestic coking coal market not to be strong in 2024 because of the abundant supply of the domestic and seaborne coking coal resource,” a trader based in Northern China said.

“Giving the situation that only Fujian province has set the goal [to cut crude steel production], it’s hard to predict any impact on the coking coal market without seeing other provinces that are production hubs of crude steel, such as Hebei and Shandong, set a goal ,” the Northern China-based trader source added.

Weaker H2 iron ore price outlook

The stricter production controls over steelmaking are expected to weigh on the raw material consumption of Chinese steelmakers, according to a trader in Xiamen.

Iron ore prices are likely to come under pressure from the weaker demand and it is anticipated that imports from Australia and Brazil will be higher toward the second half of the year.

“Iron ore inventories are at a two-year high with more cargoes expected to make landfall in the third quarter in line with an uptick in shipments from Australia,” a Singapore-based iron ore trader said. “A supply glut could crimp any potential upside in prices amid weaker consumption in the domestic portside market.”

Impact on ferro-alloys

Fujian’s steel production cut announcement will undoubtedly impose strain on Chinese steel demand and, in turn, negatively affect the upstream ferro-silicon market, according to market sources.

Ferro-silicon is mainly used in crude steel and magnesium production.

“The crude steel production decrease in 2024, not only in Fujian province but also other provinces, will make downstream steel buyers quite unlikely to make high offers to upstream ferro-alloys including ferro-silicon given the downward market,” one China-based ferro-silicon source told Fastmarkets.

“Maybe other provinces will release their own crude steel production cut plans later, which will further undermine the upstream ferro-silicon market participants’ confidence,” the source added.

“To my knowledge, domestic steel mills in China have already struggled with making low profits, and under these circumstances, many steel mills made cautious purchases on ferro-silicon. If there are more crude steel production cuts in other provinces, this could make ferro-silicon purchases even more watchful,” a second China-based ferro-silicon source said.

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Soaring Chinese tungsten concentrates prices trigger upturn for APT https://www.fastmarkets.com/insights/soaring-chinese-tungsten-concentrates-prices-trigger-upturn/ Tue, 30 Apr 2024 13:22:39 +0000 urn:uuid:96d869a4-a6f2-4426-86f4-b00a6585f629 Ferro-tungsten prices in Europe soar to a two-year high driven by increased demand, triggered by rising prices of tungsten concentrates in China

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Soaring prices for tungsten concentrates in China have been flagged as the trigger for an upturn in European tungsten prices, with marked rises in the prices of ammonium paratungstate (APT) and ferro-tungsten in Europe during the week ended Friday April 26.

Ferro-tungsten prices touch two-year high in Europe

Fastmarkets’ twice-weekly price assessment for ferro-tungsten, basis 75% W, in-whs dup Rotterdam, was $42.10-43.80 per kg W on Friday, up by 2.26% from the previous assessment on April 24.

Week on week, the price was up by 6.36%, while year on year the rise was 14.2%. In the latest assessment, the in-warehouse Rotterdam ferro-tungsten price was at its highest since May 2022.

Prices in this market in particular have shown varying degrees of fluctuation over the course of 2024 so far, with input costs in China often cited among the key reasons for price increases, while poor end-user demand has capped the upside.

“It’s finally happened. We were expecting this for the full [first] quarter. Finally, the market is digesting [the rise in concentrates prices],” a trader said. “We also see growing demand. We see consumption being better than last year and we see limited inventories.”

Although high concentrates prices in China may have been the initial spark, other factors have fanned the flame.

The latest price rises in the country have come at a time when demand in Western markets has also been picking up, with buying activity perhaps beginning to outstrip supply, market sources have suggested.

“Currently, due to the recovery of demand and the rise in prices, the global industrial chain will gradually replenish an appropriate amount of inventory. However, the output of tungsten per unit time is relatively fixed, which creates an imbalance between supply and demand, leading to an increase in prices,” a supply-side source said.

“There is currently a situation where the demand for replenishing inventory and the demand for expanding application areas overlap, such as tungsten cutting lines used in the photovoltaic field,” the same source added.

With mounting geopolitical tensions and regional conflicts in various areas, tungsten’s defense applications have also been cited among reasons for an increase in demand.

“The future for ferro-tungsten, in my opinion, is pretty bright. The only sector that is going well in Europe now is defense,” a second trader told Fastmarkets.

The same source flagged the war in Ukraine as one reason why some European countries may look to restock materials including tungsten, as well as the sanctions on imports of ferro-tungsten from Russia, leading to the growing dominance of the supply from China.

“I see an improvement in demand, then we’ll see what happens on the supply side,” the second trader said.

“We’ve been having a discussion in the market for a long time about the defense industry, which is a main driver for tungsten consumption. We didn’t see that last year, but maybe that’s what we see now – a slow recovery,” the first trader added.

The cheaper units that arrived at the end of December have now been depleted, according to the first trader, and this could also contribute to an increase in the cost of replacement.

The sustainability of the price rise for ferro-tungsten will also depend on whether demand remains strong in Europe, a third trader said.

“There is very little material in the market, but also quite a few consumers covered their requirements. So, it will depend on new demand coming in to support the higher prices,” he said.

He added, however, that he had seen an uptick in demand in recent days, with some consumers bringing forward their requirements for material.

Western APT market wakes up

APT prices showed a prolonged period of stagnation during 2023 and into early 2024, linked mainly to destocking activity, with an extremely quiet spot market.

Fastmarkets’ latest weekly price assessment on April 24 for tungsten APT 88.5% WO3 min, cif Rotterdam and Baltimore, duty-free, was $310-339 per mtu WO3, up by 3.02% week on week. But movement in this market only began to emerge at the end of March.

Before that, the price had remained in the region of $300-325 per mtu WO3 between November 17 and March 22, with almost no spot activity reported during that period.

Since then, however, spot activity has begun to pick up again.

“Now we see demand slowly improving, with depleted stocks,” a buy-side source said. “Customers tend to double-order, which causes increasing demand.”

With buyers now looking to replenish their depleted stocks at a time when raw materials costs have been soaring, and the availability of these raw materials has been declining, suppliers have faced challenges in keeping up with orders.

Growth in the amount of material requested in the spot market meant that even producers may need to buy-in material to meet demand. This also contributed to the upside for APT prices in particular, the supply-side source told Fastmarkets.

“After product sales, it is difficult to purchase tungsten raw materials to create the product at the same affordable price, or at the same cost level. Therefore, the [sales] price also includes a cost-increase factor, a supply-tension factor against demand, and market conditions [at the time of] conclusion,” the supply-side source added.

Other costs such as sea freight, insurance, transportation from plant to sea port, handling fees for loading into containers, customs clearance fees and interest fees also need to be taken into consideration, according to the supply-side source. These may also contribute to cost support for APT prices on a CIF Rotterdam or Baltimore basis.

The situation in China

Tungsten concentrates prices in China remained within relatively tight ranges over the course of 2023, without any major spikes, but began to rise gradually at the end of the year and into 2024, before showing significant rises beginning in April.

Tight spot availability in the country has been cited as the main driver for the rises, with further support from a combination of production cuts, stricter environmental supervision in mining areas, regional conflicts around the world, and the growing demand from the photovoltaic and manufacturing industries.

In Fastmarkets’ most recent assessment on April 24, the price of tungsten concentrate 65% WO3, in-whs China, was 134,500-138,000 yuan ($18,500-18,982) per tonne, up by 3.22% week on week.

Month on month, the price was up by 7.28%, and year on year the rise was 12.1%. The latest increase put the price at its highest level since September 2013.

Indeed, the availability of material has now become so tight that suppliers have been reported to be looking to overseas markets to fill gaps.

Scrap and concentrates in overseas markets are both in very tight supply, and we are also purchasing tungsten raw materials from overseas markets to make up for the supply gap in the domestic market in China,” the supply-side source said.

But cautious sentiment in China has begun to emerge recently, with some market participants questioning whether the upside will be sustainable over the longer term.

“Despite the tight spot availability of upstream tungsten concentrates, it is quite hard to say whether the China tungsten market will maintain its upward momentum in May, because some tungsten stockholders may destock [if] the prices stop rising,” a China-based tungsten trader said.

But the end may not yet be in sight for concentrates price rises in China, with support also coming from higher long-term contract offers from major tungsten producers in the country during the latest pricing session.

“Following Jiangxi Tungsten’s first-grade tungsten concentrates long-term contract offer at 135,000 yuan per tonne in April, I heard that even spot tungsten concentrate offers have increased [further], and domestic APT offers were forced to go up [as well],” a second China-based tungsten trader said. “But to my knowledge, actual deals are mostly made on a long-term contract basis.”

“Tungsten prices have risen like crazy recently,” a third China-based tungsten trader added, “but even if many tungsten market participants feel that this rising trend is not rational, the upward momentum has not stopped so far.”

Downstream markets have not seen the same major upward momentum, however, with comparatively modest movement in recent weeks, following periods of stability that had lasted for several weeks – months, in the case of APT – into the end of 2023 and the beginning of 2024.

“The main downstream tungsten alloys demand has not shown any obvious improvement,” the second China-based trader said.

Fastmarkets’ weekly price assessment for tungsten APT, 88.5% WO3 min, fob main ports China, was $310-320 per mtu WO3 on April 24, up by 1.29% week on week, and by 2.44% month on month. The price had stayed at $305-310 per mtu WO3 between February 21 and April 3.

Also on April 24, Fastmarkets’ weekly price assessment for ferro-tungsten, export, min 75%, fob China, was $41.50-43.00 per kg W, up by 1.2% week on week and by 3.05% month on month.

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Four reasons behind the ten-year high of Chinese tungsten prices https://www.fastmarkets.com/insights/four-reasons-behind-the-ten-year-high-of-chinese-tungsten-prices/ Tue, 23 Apr 2024 11:17:38 +0000 urn:uuid:6c50cebd-8ebe-4b7b-8a1d-e8c59e04fc4c Chinese tungsten prices reached a ten-year high in the recent week thanks to production cuts, stricter environmental supervision in mining areas, regional military conflicts and strong demand from photovoltaic and manufacturing industries, sources told Fastmarkets on Tuesday April 16

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Fastmarkets’ weekly price assessment for tungsten concentrate 65% WO3, in-whs China was 129,500-132,000 yuan ($17,900-18,245) per tonne on Wednesday April 10, up by 2,500-3,500 yuan per tonne from 127,000-128,500 yuan per tonne the assessment prior.

The latest assessed price represents a ten-year high, up by 0.78% from 127,000-130,000 yuan per tonne on December 11 2013.

China tungsten production reduction

China was the world’s largest tungsten producer, accounting for approximately 80% total global tungsten production in 2023, sources said. 

Despite this, according to the latest data from the United States Geological Survey (USGS), China produced approximately 63,000 tonnes of tungsten in 2023, down by 4.55% from roughly 65,867 tonnes in 2022. 

“The production reduction has led to the tightness currently seen in the Chinese spot tungsten market, which has been a support for domestic upstream tungsten concentrates and ammonium paratungstate (APT) prices since November,” a China-based tungsten producer source said.

In addition, on March 18, China’s Ministry of Natural Resources announced that the mining quota of 2024’s first batch of tungsten ore (tungsten trioxide content 65%) was 62,000 tonnes, down by 1,000 tonnes, or 1.59%, from 2023’s first batch quota of 63,000 tonnes of tungsten ore (65% WO3).

The 2024 first batch mining quota in Heilongjiang dropped by 800 tonnes, while that of Zhejiang and Anhui provinces decreased by 100 tonnes, compared with the first batch quota for 2023.

“The announced mining quota for 2024’s first batch of tungsten ore has declined since 2020,” a second China-based tungsten producer source said. “Many market participants anticipated that tungsten production in 2024 will continue to be tight since the overseas tungsten production will be quite hard to fill the gap.”

Stricter environmental supervision in tungsten mining areas

On March 22, China’s Ministry of Natural Resources announced that it would conduct inspections in mining areas in 2024; mineral producers would need to rectify any issues found in spot checks to meet environmental protection standards, sources said.

“The environmental protection inspections across mining areas in Jiangxi and Hunan provinces, two major tungsten production hubs in China, caused some production cuts among some tungsten concentrate producers and smelters,” a China-based tungsten trader source said.

Any issues found in the spot checks that have not been rectified according to standards of environmental supervision, China’s Ministry of Natural Resources will urge the relevant provincial natural resources authorities to organize investigation procedures and rectification. Should any mines fail to rectify specified instances of noncompliance, the enforcement authorities will file a case for investigation and give severe punishments to them, sources told Fastmarkets.

“This time, the environmental supervision across mining areas is stricter, many tungsten concentrates producers and smelters have had to suspend their production to have facility maintenance checks to meet the standards of environmental supervision,” the China-based tungsten trader source said.

A fourth China-based tungsten trader added, “The production cuts due to environmental supervision will further make the spot availability tighter in 2024.”

Tungsten’s military applications

Because of its high melting point, tungsten can be used in a variety of military applications, namely the manufacture of tanks, armor-piercing bullets and aircraft engines, among others. 

On November 30, the Ministry of National Security of China published an article in which it defined tungsten a critical material, sources said.

“As the world’s largest producer of tungsten, China has already imposed 20% tariffs on tungsten concentrates in 2022 and restricted the exports of tungsten to protect the domestic reserves,” a second tungsten trader said. 

Regional tensions pushed up tungsten prices due to its status as a critical strategic material, sources said. 

“With the world in increasing uncertainty, many buyers tend to purchase critical strategic materials like tungsten and rare earth to [hedge against risk],” the second tungsten trader said. 

A third tungsten trader added, “Apart from the Russia-Ukraine war, the regional conflicts in mid-east are also ongoing. All the conflicts will consume large amounts of weapons, therefore, the need for tungsten remains very strong.”

Strong tungsten demand from photovoltaic and manufacturing industries

Tungsten concentrates is the key raw material of tungsten filament, which is a silicon wafer cutting tool in the photovoltaic industry.

In 2025, the total installed capacity of China’s photovoltaic industry is expected to reach 550GW, and the demand for tungsten filament will reach 334.99 million kilometers, according to market estimates by the Silicon Industry of China Nonferrous Metals Industry Association.

“The availability of tungsten concentrates are already in quite tight now, especially the good grade of tungsten concentrates. Such booming photovoltaic demand is very likely to continue to underpin the upstream tungsten concentrates market,” a fourth tungsten source said.

According to the latest data released by the China Federation of Logistics and Purchasing, the global manufacturing purchasing managers’ index (PMI)reached 50.3% in March, up by 1.2% month on month. 

“The rise of PMI in March has showed the improved global trade in terms of rising orders in manufacturing sectors,” the fourth tungsten source said.

The recovering of manufacturing industries will lead to facilities renewal on a large scale, which will, to some, extent, increase the demand for hard alloys and other alloys, sources said. 

“Tungsten is the key raw material to produce hard alloy thanks to high hardness and high durability. The rising demand for hard alloys will drive up the tungsten demand and prices,” a fifth tungsten source said.

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Electrical steel now China’s star product amid global decarbonization drive https://www.fastmarkets.com/insights/electrical-steel-now-chinas-star-product-amid-global-decarbonization-drive/ Tue, 23 Apr 2024 09:57:39 +0000 urn:uuid:a2d6a79f-ef61-4435-bf97-150715a50889 The global decarbonization drive is turning electrical steel into one of China's key ferrous products, with electrical steel exports surging in recent years, sources told Fastmarkets

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Exports of electrical steel have increased quickly in recent years, and will likely maintain this momentum in 2024 due to the good demand due to an expanding electric vehicle (EV) industry, sources said.

The exports of electrical steel started a sharp increase in 2021, with a total 860,959 tonnes shipped out of China, up by 335,056 tonnes, or 64%, from 525,903 tonnes in 2021, according to data from the country’s General Administration of Customs.

The exports increased by 49% year on year to 1.28 million tonnes in 2022, but dropped slightly by 4% to 1.23 million tonnes in 2023.

The top five buyers of China’s electrical steel took a total share of 54% of the country’s total exports of the products.

The biggest buyer of China’s electrical steel was India in 2023, taking 189,184 tonnes, or 15%, of China’s total exports of the products.

The exports totaled 356,726 tonnes in the first three months of 2024, with a year-on-year increase of 30% from 274,972 tonnes.

The top five buyers of Chinese electrical steel remained India, Turkey, Mexico, Italy and the United States, with a total share of 57%. India remained the biggest buyer by volume, with 58,896 tonnes and took 17% of the total exports in the first three months of 2024.

“The major reason of the active exports is the [expanding] electric vehicle industry outside China,” an exporter in China said.

For instance, the EV sales volume in India is forecast to increase by 66% in 2024 compared with 2023 and take a share of 4% of the total sales of EVs, according to an industry research institute Counterpoint Research.

In Mexico, the production of electric vehicles exceeded 100,000 units in 2023, up by 37% year on year. The sales of electric vehicles took 19% of total vehicle sales volume in 2023, according to China’s public press People’s Daily.

BYD, JAC Motors, Volvo and other automotive companies, along with Mexican new energy transportation operator VEMO and charging platform Evergo, have jointly established the Mexican Electric Vehicle Association early in 2024. The association’s goal is to achieve a 50% share of Mexican electric vehicles in new car sales by the end of 2030, People’s Daily reported.

Rising capacity drives exports need

“Exports will be an option for more China’s steel mills because they need to sell their rising production of electrical steel to foreign buyers,” an industry analyst said.

China produced 15.28 million tonnes of electrical steel in 2023, up by 15% from 13.31 million tonnes in 2022, according to data published by an industry body China Society of Metals.

Among the total production, the non-grain oriented electrical steel, which is used to producing motors, was 12.04 million tonnes in 2023, up by 8% year on year from 11.14 million tonnes.

Production of grain oriented electrical steel, used in producing transformers, was 2.65 million tonnes, up by 22% from 2.17 million tonnes in 2022.

Some steel mills are still expanding the capacity of electrical steel due their expectations of increased demand.

For instance, a 1-million-tonne-per-year electrical steel project started construction in September 2023 in Inner Mongolia, with the first phase of the project, totaling 500,000 tpy, is set to into into production in May 2024, according to a notice published by the local government office.

Industry analysts expected the annual capacity of electrical steel to reach 18-20 million tonnes by 2026, compared with the capacity of 16.67 million tonnes in 2023.

Decent margins prompt mills to bet more amid industry downturn

Decent margins amid strong demand at home and abroad encouraged Chinese mills, including the leading ones, to expand their electrical steel capacity, according to market participants.

Given the downturn of China’s steel industry, major mills have already strategically adjust their product portfolio to increase their competitiveness and maintain their leading roles. The great investment in non-oriented electrical steel projects by mills including Baowu Group – the biggest steelmaker in the world, and Shougang Group, is an example for that, an industry analyst in China said.

Shougang Group, a leading Chinese steelmaker and major electrical steel supplier, said in November 2023 that electrical steel is its star product. Its capacity of high-grade non-oriented electrical steel used in EVs has reached 550,000 tonnes per year, and its total electrical capacity will reach 2.2-2.3 million tpy by 2025, with high-end products accounting for over 70%.

High profits from high-grade electrical steel thanks to growing demand from the booming EV market prompted Shougang to increase the capacity of the product, according to the Beijing-headquartered steelmaker.

Shougang has exported its electrical steel to more than 24 countries and regions, and it will continue its expansion in the overseas markets to increase the ratio of exports to avoid homogenization of competition in China given the growing electrical steel capacity.

Baosteel (Baoshan Iron & Steel Co., Ltd.), which is the listed arm of steelmaking giant China Baowu Steel Group, said in 2021 that electrical steel was its most profitable product, following by automotive sheet, heavy plate, and pipes. More than half of driving motors in China-manufactured EVs used non-oriented electrical steel produced by Baosteel, the steelmaker said in October 2023.

Data from China’s National Bureau of Statistics show that the country’s ferrous metal smelting and rolling processing sector recorded a total revenue of 8.34 trillion yuan ($1.15 trillion) in 2023, down by 2.2% year on year.

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