Ferro-alloys Market Tracker

Transcription

1 Ferro-alloys Market Tracker A unique source of market intelligence, analysis and forecasts covering the international ferro-alloys industry Issue Contents Ferro-alloy prices 2 Ferro-silicon 4 Silicon Metal 6 Manganese 7 Ferro-chrome Nickel 12 Molybdenum 13 Vanadium 15 Economic indicators 16 Weak euro impacts European prices: page 4 Supply concerns boost silicon metal: page 6 Chinese ferro-chrome prices declining: page After achieving an impressive $0.35/lb gain in second-quarter charge chrome contracts, South African producers will maintain a strong position in third-quarter negotiations. Not only do South African power costs remain an issue, but with the nation s hosting of the World Cup, this too will put an additional strain on power supplies available to industrial customers. Furthermore, South Africa will be moving into its winter season, traditionally characterised by reduced power availability and higher costs, with some reduction in ferro-chrome production likely as a result. However, changes in the US dollar/euro exchange rate will also influence price negotiations. If the dollar maintains its current strength against the euro, the costs of ferro-chrome for European stainless steelmakers will rise even if ferro-chrome prices remain unchanged. The strong dollar factor will weaken the South African charge chrome producers negotiating position in the next round of discussions, and will prompt European stainless mills to resist producer attempts to hike third-quarter contract prices. Recent weakening in Chinese ferro-chrome prices will also help stainless mill arguments. Given these factors, we do not foresee a third-quarter charge chrome contract price rise of the magnitude witnessed in the second quarter. At this stage, we expect to see a rollover or slightly higher prices in the next round of negotiations. MBR is forecasting a minimum of a rollover, and a maximum of a $0./lb rise in charge chrome contract prices in the third quarter of 20. European ferro-alloy price forecasts ($/tonne) Ferro-alloy price momentum has slowed, and we believe prices will flatten out for the remainder of the second quarter and into the third quarter 5,000 4,000 FeSi 75% SiMn 65-70% HC FeCr 60% 3,000 2,000 1,000 Forecast prices

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3 2 Ferro-Alloys Market Tracker Year Year Year Nov Dec Feb Mar Apr EUROPEAN FREE MARKET PRICES (1,3) Ferro-silicon, 75% Si /t 885 1, ,050 1,295 1,463 1,413 Ferro-manganese, 78% Mn /t 896 1, ,030 1,0 1,130 Silicon Metal, min. 98% Si, -20 tonne lots /t 1,585 2,313 2,3 1,712 1,702 1,743 1,729 1,836 1,869 1,797 Silico-manganese, 65-75% Mn /t 927 1, ,020 1,025 1,025 Charge chrome, 52% Cr $/lb Ferro-chrome, 6-8% C, 60% Cr $/lb Ferro-chrome, 0.1% C, 68-70% Cr $/lb Nickel, LME cash(4) $/lb Nickel, 3-month melting plating grade(4) forward(4) $/lb Ferro-molybdenum, 65-70% Mo $/kg Ferro-molybdenum, 60% Mo(4) $/kg Molybdic oxide, drummed(4) $/lb Ferro-titanium, 70% Ti $/kg Ferro-tungsten, 75% W(4) $/kg Ferro-vanadium, 70-80% V $/kg US FREE MARKET PRICES (1,5) Ferro-silicon, 75% Si $/lb Silicon metal $/t 2,320 3,812 2,670 2,727 2,631 2,677 2,789 2,811 2,811 2,811 Ferro-manganese, 78% Mn $/t 1,375 2,828 1,226 1,437 1,388 1,331 1,372 1,495 1,563 1,531 Silico-manganese, 65-75% Mn $/t 1,693 2,365 1,153 1,448 1,400 1,312 1,375 1,470 1,494 1,494 Ferro-chrome, 6-8% C, 60-65% Cr $/lb Ferro-molybdenum, 65-70% Mo $/lb Molybdic oxide, canned $/lb Ferro-vanadium, 70-80% V $/lb CHINESE EXPORT PRICES (6) Ferro-silicon min. 75% $/t 877 1,528 1,1 1,134 1,177 1,250 1,270 1,271 1,315 1,390 Ferro-manganese min. 75% Mn, 7.5% C $/t 1,125 2,447 1,380 1,315 1,395 1,490 1,505 1,505 1,505 1,505 Silico-manganese min. 65% Mn, max 17% Si $/t 1,118 2,7 1,272 1,325 1,385 1,385 1,385 1,385 1,385 1,560 Silicon metal min. 98.5% fob Chinese ports $/t 1,359 2,170 1,666 1,675 2,186 2,147 2,125 2,161 2,175 2,175 Ferro-chrome 8% C, 60% Cr $/lb Ferro-molybdenum min 60% Mo $/kg JAPANESE IMPORT PRICES (7) Ferro-silicon, Chinese $/t 930 1,593 1,165 1,185 1,223 1,360 1,318 1,333 1,420 1,4 Silicon metal, spot $/t 1,359 2,163 1,719 1,835 2,138 2,250 2,265 2,233 2,375 2,360 Silico-manganese, Chinese $/t 1,218 2,126 1,326 1,360 1,4 1,435 1,615 1,560 1,670 1,675 Charge chrome, producer $/lb Molybdic oxide $/lb Ferro-vanadium $/kg BULK ORE PRICES Manganese Ore 48-50%, max 0.1%P fob $/mtu Chrome Ore South Africa lumpy 35-40% (8) $/t EXCHANGE RATES Dollar/sterling $/ Yen/dollar /$ Dollar/euro $/ Notes: Current month's averages are to the 21st (1) Tonnage prices are bulk basis; lb or kg prices are metal contained (3) Delivered basis, except (4) in warehouse (5) in warehouse, Pittsburgh (6) fob main Chinese ports (7) average of Tex report bimonthly quotes, (8) cif main Chinese ports

4 Global Crude Steel Production (million tonnes) 20 Ferro-Alloys Market Tracker Nov Dec Feb Mar Apr Belgium France Germany Italy Spain United Kingdom Other Europe Total Europe % Change Y-o-Y 0.9% -4.2% -30.6% -43.6% -30.5% 7.0% 42.0% 9.2% 35.9% 43.8% 33.0% 49.1% 63.3% Canada USA Total N America % Change Y-o-Y -0.6% -5.0% -37.8% -49.4% -37.2% 3.1% 66.7% 1.1% 44.6% 52.9% 67.7% 80.0% 68.7% Latin America % Change Y-o-Y 6.5% -0.6% -21.1% -31.8% -19.8% 17.6% 49.9% 12.0% 54.7% 54.7% 46.1% 48.9% 33.0% Japan India South Korea Taiwan Other Asia (excl. China) China Total Asia % Change Y-o-Y 12.1% 2.5% 4.5% -6.8% 8.9% 28.5% 26.9% 30.8% 30.0% 26.5% 26.4% 27.7% 31.0% Africa Australasia Russia Ukraine Other CIS World Total 1,3.31 1, , % Change Y-o-Y 7.8% -0.7% -9.7% -19.7% -12.7% 23.8% 31.3% 25.5% 34.5% 31.4% 29.2% 33.2% 36.0% Source: International Iron & Steel Institute, Quarterly crude steel production emerging markets (% change y-o-y) Quarterly crude steel production mature markets (% change y-o-y) 50% 30% % -% -30% -50% Latin America China CIS Total World 70% 60% 50% 40% 30% 20% % 0% -% -20% -30% -40% -50% USA Europe Japan Total World Source: IISI, Source: IISI,

5 4 Ferro-Alloys Market Tracker 20 Ferro-silicon highlights US prices climb higher on supply concerns European prices supported on tight supply Chinese prices easing as demand slides Market Outlook $/tonne European FeSi price 2,500 2,000 1,500 1,000 Spot ferro-silicon prices in the USA increased to $1.00/lb on fresh supply worries in, in a market already supported on tight availability and firming consumption in the steel sector. There are rumours of some supply problems at Ferroatlantica s Ferroven operations, and while it may be more to do with highpurity grades than standard grades, US availability has been tight and any negative supply news will be a factor. European ferro-silicon prices remain supported on persistently tight availability despite a low level of deals being done for prompt material. However, prices are expected to trend upwards through the rest of this year due to limited production capacity and we expect there will be a deficit of ferro-silicon supply this year. Chinese downstream consumers have built up sufficient stocks after a persistent bout of short covering in the past couple of months and may be satisfied with that store of material, acting as a drag on spot prices. However, we do not expect to see a steep fall in prices as production costs are strong and Beijing is once again urging local authorities to clamp down on energy-sensitive sectors in imposing stronger electricity costs and eliminating excess capacity. US market hits $1/lb US spot market ferro-silicon prices are at $ /lb delivered, up about $0.25/lb since the start of the year. New supply worries have been triggered after a drop in imports from Venezuela, where Spanish-based producer Ferroatlantica has a subsidiary producer, Ferroven. Ferroven has had production problems with its premium grades of ferro-silicon, of which it has an annual capacity of some 12,000 tonnes, although material of 75%-grade silicon content has also been affected. Ferroven, which has an annual capacity to produce some 85,000 tonnes of standard grade ferro-silicon, has declared force majeure at its plant in Venezuela, according to our sources, although company officials could not be reached for comment. Europe extends stability The European market has been increasing this year on strengthening steel demand and tight supplies. European steel production has gained to around 80% of utilised capacity, from Ferro-silicon prices, $/tonne European prices steady in euro terms, but falter in US dollars as euro loses value Chinese HR steel prices vs. FeSi and SiMn export prices, Domestic HR prices are starting to slip, and ferro-alloy prices may soon follow 2,800 Europe 75% Si 900 2,800 2,500 2,200 1,900 1,600 US 75% Si China 75% Si $/tonne ,400 2,000 1,600 $/tonne 1,300 1, Nov Nov HR Coil (LHS) FeSi (RHS) SiMn (RHS) Nov 1,

6 20 Ferro-Alloys Market Tracker 5 about two-thirds of capacity in uary. In Germany, Europe s biggest steelmaker, current steel production is around 90% of utilised capacity. And while European ferro-silicon producers in western Europe, such as Elkem, Fesil, Finnfjord and Ferroatlantica are increasing production, that material is already sold out to customers in the steel sector. European ferro-silicon producers are operating at close to, if not already at full, production capacity, while stock volumes are below half of their typical levels of some 0,000 tonnes. The current European spot ferro-silicon price is 1,400-1,450/tonne ($1,715-1,775/tonne) duty delivered paid. Imports from China have been negligible and such material would have to be priced at around 1,500/tonne to compete in Europe. There is little volume on the EU border and little on order. Russian exports have been mostly sold to the USA in recent months. While in the middle of the quarter, typically a quieter period, customers have what they need in terms of raw materials. They have been supplementing that with a few extra volumes on the spot market though. However, the market is mostly expecting a dip in production of European steel volumes in the third quarter, with some 41-42m tonnes of production, compared with an industry forecast of about 45-46m tonnes in the current quarter. The focus is on how demand in the steel industry develops in the third quarter, which is questionable. Some dealers say steelmakers will produce consistently through that period, although others reckon there will be a 2-3 week break in production for seasonal vacations. ArcelorMittal has commented that steel demand in Europe may be hit with the debt problems in the euro-zone, although the debt crisis will not have a huge impact on overall growth forecasts. In MBR s view, the Greek crisis and faltering European stock markets, together with the falling value of the euro, will dampen consumer confidence, and in turn, steel demand. Steelmakers will react by cutting production as normal for seasonal summer holidays. China eases in slack trade The Chinese ferro-silicon market has eased amid flat business, with domestic prices for 75% grade material in a range of Rmb6,450-6,600/tonne ($ /tonne) ex-works. The export market is seeing an increase in buying enquiries, although trade has been quiet overall. Export prices are fetching $1,380-1,400/tonne fob for 75% grade material. However, while some major smelters are holding out with strong offers, most medium and small smelters have accepted they need to sell at lower prices. Consequently, market prices are reported in a wide price range. Meanwhile, the Chinese magnesium market, a consumer of domestic ferro-silicon, has softened recently. Moreover, most magnesium producers are bearish about the short term and their consumption of raw materials. Market weakness may deepen as Chinese steel mills are cutting production and while some steel mills have started new tenders for ferro-silicon, they are looking for only small lots. In terms of ferro-silicon production, China s biggest ferro-silicon producer Erdos Group is planning to increase production to 620,000 tonnes this year up almost 25% from the 500,000 tonnes it produced last year. Global Ferro-silicon Supply-Demand Balance ('000 tonnes Si content) 20 e e e f 20f f f f f 20f Global Consumption 1,020 1,066 1, , , ,520 Global Production 1,0 1, , , ,563 Market Balance Price Forecast - European Market ($/t) 1,562 2,157 2,516 1,848 2,021 1,391 1,168 1,254 1,363 1,294 1,520 1,900 1,900 1,975 1,824

7 $/t o nn e 6 Ferro-Alloys Market Tracker 20 Silicon metal highlights Strong demand from chemical and aluminium customers boosts US prices Rising domestic supply dampens Chinese prices European prices move higher on supply worries Market Outlook $/tonne$/tonne 2,500 2,000 1,500 European Si Metal prices US silicon metal prices have edged up in line with consumer demand for immediate delivery, while supplies have tightened. A pick up in spot business activity in recent weeks has been driven on consumers relying on prompt deliveries instead of buying forward and building stocks. In China, electricity appears to no longer be a problem as the summer wet season is arriving and it is our view further price declines should be expected in the coming weeks as new material hits the market. Consumers may have stocked up a lot of metal when prices were surging and they are in no hurry to purchase in the short term. The European spot silicon metal market has jumped almost % in amid strong demand and tight availability due to supply problems, something we see persisting through the rest of this quarter. The market situation is fluid as there has been huge demand for silicon metal this year and while the chemical industry has been buying much of that material, production problems in South Africa and the USA should at least support prices through June. US market edges up on prompt demand With more spot demand recently, US supplies have tightened further and pushed up the price of silicon metal to $ /lb. The US silicon metal price has moved up almost 20% since February this year as consumers in key end-user sectors, the aluminium and chemical sectors, have bought material to replenish their dwindling stocks. China supply weighs on market In China, silicon metal spot market prices have been dragged down on increased supplies with more silicon metal smelters restarting idled furnaces as power supplies increase after the domestic winter. Silicon 98.5% min grade (5-5-3) metal is around Rmb12,400/tonne delivered to ports. Better grade metal is quoted at Rmb12,800-13,000/tonne delivered to ports. Export prices for grade metal have also slipped to $2,2-2,240/tonne fob, compared with a peak of $2,300/tonne at the end of April. Chinese silicon metal prices surged some % in March and April as the severe drought in southwestern China disrupted power supplies to industrial sectors. The majority of China s silicon metal capacity is located in the Guizhou, Yunnan and Hunan provinces where electricity is mostly hydro-power generated. Europe squeezed % higher Free market prices have jumped more than 150/ tonne for standard secondary aluminium-grade (98.5% grade) (5-5-3) to around 2,250-2,300/ tonne free on truck duty delivered paid, while better grades of low iron content silicon (4-4-1) are around 2,300-2,350/tonne. Supply worries persist about production in South Africa, where Ferroatlantica subsidiary, Silicon Smelters, had been having production problems, and in the USA, where Globe is operating below production capacity. We understand a lot of Ferroatlantica s production in Europe has gone to the USA due to problems in South Africa and at Globe, and European producer Elkem has not been producing that much high-purity grade metal. Silicon metal prices, $/tonne Price movements mixed as Chinese prices edge higher, but US prices slip $/tonne 3,500 3,000 2,500 2,000 1,500 1, European Free Market US Free Market Hong Kong Free Market

8 Manganese highlights 20 Ferro-Alloys Market Tracker 7 European prices rise in local currency terms as euro weakens US prices correct downwards as supply worries ease Chinese prices edge higher on rising costs Market Outlook $/tonne$/tonne 2,000 1,500 1, European SiMn Price In Europe, there has been a steady rate of daily bids for manganese alloys from consumers in the steel industry, as well as traders. That has been added to as the euro has been sliding against currencies in Asia and North America, which has made it that much more expensive and difficult to import material from places where demand is already firm and availability is tight. We see more price increases in manganese alloy prices in the short term against steady demand and persistent euro weakness; there are deep investor worries about a collapse in the single European currency as the euro-zone tries to plug a vast multibillion hole in the finances of Greece. The US silico-manganese market has been quieter after some short covering in March when Eramet Marietta declared a force majeure and switched its silico-manganese furnace to ferro-manganese production. Business activity has since settled down and that has been reflected in a slight drop in spot market prices. In China, manganese ore costs have been rising, while shortterm electricity costs will be set on whether the southwestern provinces will enforce dry season tariffs in, or cheaper tariffs as the rainy season develops Europe buoyed on demand, euro The European high-carbon ferro-manganese market has moved up, strengthening on steady demand for prompt material from steelmakers and on a weakening euro. High-carbon ferromanganese 75% material is at 1,125-1,175/tonne delivered. There have been a lot of enquiries, particularly for high-carbon ferro-manganese, we understand. Spot demand from steelmakers has been steady after quarterly settlements as availability has been tight this year, while the euro has been weakening amid fears of contagion from economic troubles in Greece, which is being rescued with a huge bailout package. There have been buying enquiries on an inter-merchant business level, as well as from steelmakers. There has also been increasing interest from potential bidders in the USA as the euro weakens. While domestic availability of ferro-alloys has been tight in the USA this year amid strengthening world steel production, the single European currency has lost some 8% in value this year, particularly versus the dollar. Medium-carbon ferro-manganese prices are around 1,900/tonne and low-carbon alloy is available at about a 0/tonne premium to that. Meanwhile, the European silicomanganese market has jumped about 7% on steady buying interest for prompt material as well as euro weakness. Silico-manganese 65/17 grade spot prices are at 1,150-1,200/tonne delivered. Macedonian manganese ferro-alloys smelter Skopski Leguri Dooel, which has been idled since November last year, re-started production at the end of the April. The plant is running on one furnace, which will produce 4,500-5,000 tpm of silico-manganese and/or ferromanganese, depending on customer needs. The other furnace will be idled until necessary. Silico-manganese prices, $/tonne Price movements mixed as Chinese prices edge higher, but US prices slip 3,500 3,000 2,500 2,000 1,500 1, European Free Market US Free Market Hong Kong Free Market

9 8 Ferro-Alloys Market Tracker 20 However, the plant s production of silico-manganese 65/17 has been pre-sold at 1,150/tonne ex-warehouse Skopje, meaning that no spot material will be available for immediate shipment. For June production, the company is hoping to sell the material at 1,180 1,220/tonne ex-warehouse and is negotiating with major steel mills in Europe, Turkey and CIS. US supply worries ease Spot silico-manganese prices in the USA have eased as worries faded about a possible supply shortage when domestic production was unexpectedly cut in March. US spot silico-manganese prices have slipped back to $ /lb. The spot ferro-manganese market in the USA has been mixed, with refined grade manganese allloy prices dropping in line with supply worries, while high-carbon material has been steady on firming steel production. Refined ferro-manganese grades, such as medium-carbon material have corrected down to $ /lb, although remain above the $ /lb level seen immediately before the force majeure was declared at domestic producer Eramet Marietta on March 7. Low-carbon ferro-manganese has also eased to $ /lb. High-carbon material has been steady at $1,525-1,575/long ton delivered. However, Eramet Marietta is set to end its force majeure at its plant next month after halting refined ferromanganese production. This situation is expected to persist until the second half of, when the refurbishment of a furnace is due to be completed. Eramet said it will increase manganese production in the second half of this year if world steel production continues to strengthen. China rides production costs The domestic Chinese manganese alloys market has been firm on strong production costs, while export prices have edged up, partly due to stronger prices at home and weaker competition abroad. Prices for 65/17 grade silico-manganese are at Rmb8,300-8,600/tonne. Spot prices for 44-46% grade imported lumpy ores are being offered at Rmb70-73/mtu, from Rmb68-70/mtu in April. Major overseas ore suppliers, such as BHP Billiton and Eramet Comilog, have increased their monthly offer prices for shipments to Chinese customers in. Meanwhile exports of 65/17 grade silico-manganese have increased to $1,550-1,630/tonne fob, from $1,520-1,560/tonne. The ferro-manganese market is also steady, with 65% manganese grade high-carbon material at Rmb8,200-8,500/tonne, while exports of 75% manganese grade material are at $1,700-1,750/tonne fob. In India, prices of silico-manganese are Rs61,000-62,000/tonne ($1,365-1,390/tonne). Indian producers had to cut or stop production due to power shortages recently, which has underpinned the market. Global High-carbon Ferro-manganese Supply-Demand Balance ('000 tonnes) 20 e e e f 20f f f f f 20f Global Consumption, Mn Content 987 1, , , ,361 Global Production (Gross Weight) 1,300 1,350 1, , ,0 3,684 1,0 1,050 1,060 1,9 4,199 Global Production, Mn Content 1,014 1, , , ,275 Market Balance, Mn Content Price Forecast - European Market ($/t) 2,269 3,5 2,941 2,411 2,682 1,475 1,160 1,7 1,3 1,258 1,326 1,450 1,425 1,525 1,432 Global Silico-manganese Supply-Demand Balance ('000 tonnes) 20 e e e f 20f f f f f 20f Global Consumption, Mn Content 1,379 1,441 1,370 1,7 5, ,8 1,0 1,121 4,291 1,182 1,234 1,194 1,227 4,837 Global Production (Gross Weight) 2,0 2,250 2,000 1,587 7,937 1,350 1,500 1,600 1,670 6,120 1,700 1,755 1,800 1,870 7,125 Global Production, Mn Content 1,4 1,5 1,340 1,063 5, ,005 1,2 1,119 4,0 1,139 1,176 1,206 1,253 4,774 Market Balance, Mn Content Price Forecast - European Market ($/t) 2,190 2,706 2,429 1,766 2,273 1, ,124 1,350 1,128 1,335 1,450 1,400 1,550 1,434

10 20 Ferro-Alloys Market Tracker 9 Global Stainless Steel Production ('000 tonnes) Jul- Aug- - Oct- Nov- Dec- - Feb- Belgium 1,470 1, France Germany 1,567 1, Italy 1,483 1, Spain United Kingdom Sweden Finland Austria Total EU15 7,746 5,914 1,229 1,428 1,561 1, Other Europe Total Europe 7,825 5,989 1,251 1,444 1,577 1, % Change Y-o-Y -3.6% -75.3% -45.3% -37.1% -12.7% 19.9% -35.6% -44.8% -17.5% -13.4% -19.0% -48.9% -23.5% -19.9% USA 1,922 1, Brazil Total Americas 2,279 1, % Change Y-o-Y -11.5% % -43.1% -43.0% -7.7% 3.1% -27.0% -.0% 24.5% -12.2% 13.1% 17.2% -6.4% -16.8% South Africa % Change Y-o-Y -6.7% % -44.2% -38.9% -30.4% -30.8% -39.4% -39.4% -54.5% -54.5% -54.5% -54.5% -54.5% -54.5% China 6,938 8,805 1,769 2,298 2,502 2, India 1,843 3, Japan 3,573 2, South Korea 1,855 1, Taiwan 1,547 1, Total Asia 15,755 17,430 3,403 4,3 5,017 4,699 1,640 1,632 1,7 1,581 1,545 1,574 1,654 1,654 % Change Y-o-Y -4.8%.6% -19.7% -0.1% 28.8% 42.1% 11.6% 13.6% 17.4%.2% 31.1% 37.1% 47.5% 42.6% Total Stainless 26,472 25,460 5,152 6,237 7,185 6,885 2,333 2,269 2,555 2,431 2,347 2,8 2,415 2,452 % Change Y-o-Y -5.1% -3.8% -30.4% -16.2% 12.6% 31.5% 5.1% 13.4% 18.2% 12.1% 39.4% 52.2% 42.3% 38.5% Sources: ISSF, AISI, Eurostat, Tekko Tokei Geppo, TSIIA, KISA, Jernkontoret, UKISSB, Eisen Und Stahl, Federacciai, IBS, INSG, Historical and forecast global stainless steel production growth rates (% change y-o-y) European HC ferro-chrome price vs global stainless steel production (% chg y-o-y) Historical and forecast global stainless production and growth rates ('000 tonnes) 7,185 6,882 7,212 7,500 (chg yoy) 12.6% 31.4% 40.0% 20.0% Global stainless output (LHS) European FeCr price (RHS) USA Europe Asia Stainless steel production is on the rise in both the EU and USA, due to improvement in underlying demand, but also due to stocking cycles. We expect rapid stainless steel output growth to continue through the first half of the year, but growth rates will slow in the latter half of 20. Capacity utilisation rates have been rising and now stand at 70-75%. Capacity utilisation rates are rising and now stand at around 75-80%. Chinese mills have been running at nearly full capacity, driving global stainless steel output higher. We believe there may be some excess stock building though, which could lead to slower output growth in the second half of the year Feb Aug Feb Aug Feb Aug Feb Source: IISI,

11 Ferro-Alloys Market Tracker 20 Ferro-chrome highlights Global stainless steel output drives ferro-chrome demand and production but signs of slowing activity emerging South African transport strike will have little effect on prices Market Outlook European FeCr Prices $/lb Chinese stainless activity is slowing after tremendous growth in the first quarter. China has ample stocks of ferro-chrome after Chinese buyers purchased ferrochrome far in advance of actual requirements early in the year in response to fears of rapid price hikes to come. European demand is faltering in reaction to economic worries stemming from crisis in Greece, and we suspect activity may now remain subdued through the seasonal summer slowdown. Prices have slipped in China for the first time in six months, though European prices are steady, and US prices have posted a modest gain. While we do not foresee a collapse in ferro-chrome prices, we would not be surprised to see stable to lower pricing in the coming months, before a renewed upturn in demand and prices in tember. Global stainless steel output jumps Global stainless steel output rose to 7.5m tonnes in the first quarter of 20, approaching recordhigh output levels of just over 7.5m tonnes reached in late 2006 and early 20. Stainless output globally rose by 11.5% quarter-on-quarter and 54.6% year-on-year. Production growth was impressive around the world, with the Americas exhibiting the most impressive growth in both year-on-year and quarter-on-quarter terms. After severe destocking and dramatic production cuts in early 20, stainless steel production began a steady recovery in the latter half of 20, with growth accelerating in early 20 on the back of restocking and improving demand from key end-use sectors. and ferro-chrome producers respond accordingly Demand for ferro-chrome has climbed sharply with the recovery in stainless steel output, and global ferro- chrome producers have restarted idled capacity and boosted operating rates to meet the increased need for material. In South Africa, Xstrata more than quadrupled ferrochrome output in the first quarter of 20, lifting output to 305,000 tonnes from just 73,000 tonnes in the first quarter of 20. IFML produced 54,000 tonnes of ferro-chrome in the first quarter, up 48% year-on-year. Kazakhstan s ENRC produced 314,000 tonnes of high-carbon ferro-chrome in the first quarter of 20, compared to just 190,000 tonnes in the prior year period. The company also doubled low- Quarterly HC Ferro-chrome output Output is recovering from last year s lows, and is expected to peak in the first half of the year High-carbon ferro-chrome prices, $/lb Chinese prices fell in for the first time in six months due to slowing demand from stainless mills 3.00 USA Forecast Hong Kong Europe (m tonnes)

12 20 Ferro-Alloys Market Tracker 11 Ferro-chrome Supply-Demand Balance ('000 tonnes) carbon ferro-chrome output to 20,000 tonnes, and boosted chrome ore output 84% year-onyear to 753,000 tonnes. Chrome producers are optimistic for the rest of the year Despite some signs of slowing in stainless steel markets, ferro-chrome producers appear largely optimistic for prospects for the remainder of 20. ENRC intends to operate its ferro-chrome operations at full capacity for the rest of the year. Etikrom is planning to raise production at Vargon from November, and is also adding 0,000 tonnes of new high-carbon ferro-chrome capacity at its Turkish operations towards the end of the year. despite signs of slowing activity Not all market players, however, are showing the same level of optimism. Outokumpu is still operating its stainless operations at just 75% of capacity, indicating that the market has not yet improved to the point to enable stainless mills to return to normal operating rates. We are also hearing increasing reports of a slowing in Chinese stainless output and demand for ferro-chrome. Chinese buyers are well stocked, and Chinese high-carbon ferro-chrome prices fell for the first time in six months in response to the weakening stainless market and sliding chrome ore prices. High-carbon ferro-chrome prices have fallen to Rmb9,400-9,600/tonne, down Rmb0-200/tonne this month. European prices remain steady at $ /lb, but there are growing fears as to the future direction of the market given the Greek debt crisis, falling European stock markets, and the weakening value of the euro, which has now fallen to a four-year low. The US market appears to be in the strongest position at present, with OEMs reporting improving demand for their products, and in turn, leading to increased consumption of both stainless steel and ferro-chrome. Recovery in the automotive sector is spurring demand higher, and we have also heard of improving conditions in the heavy truck sector, heavy equipment and machinery, and the retail supply sector. US high-carbon ferro-chrome prices have pushed slightly higher this month, rising to $ /lb. South African transport strike prompts force majeures Chrome ore and alloy prices may receive an additional boost in the coming weeks as a result of the strike by South Africa s state-owned transport company, Transnet. Workers at Transnet, which provides all the rail freight services in South Africa and owns and operates all of the country s main seaports, went on strike on. The strike could potentially severely disrupt the flow of South African ore and alloys out of the country, lending additional upward momentum to manganese ore and alloy and chrome ore and alloy prices. Xstrata has declared force majeure on their ferro-chrome and chrome ore shipments as a result of the Transnet strike, and it is rumoured that Samancor has as well. Given declining markets in both China and Europe, we do not believe the South African transportation strike will serve to boost prices significantly. Instead, the psychological impact of the strike may be sufficient to hold prices stable and prevent prices from retreating amid a slowdown in activity in both China and Europe. 20 e f 20f f f f f 20f Global Consumption 1,882 1,940 1,764 1,427 7,013 1,3 1,340 1,6 1,576 5,834 1,595 1,704 1,835 1,748 6,882 Global Production 2,033 2,060 1,933 1,242 7, ,417 1,665 1,941 5,923 1,817 1,806 1,730 1,7 7,063 DLA Stock Disposals Market Balance Price Forecast - Europe ($/lb)

13 12 Ferro-Alloys Market Tracker 20 Nickel highlights Nickel still looking very strong on a short-term view......but the restocking push will fade in the coming month or two The outlook for the second half of the year looks less bullish Market Outlook Nickel price forecast ($/tonne) 26,000 22,000 18,000 14,000,000 Nickel prices have been in decline over the past month. Short-term technical and fundamental indicators suggest that buying interest has picked up and they make a strong case that a rebound is overdue now. Stock withdrawals continue, which bodes well, as does the pick-up in cancelled warrants into the recent price weakness. Technically, key resistance will be between $23,000/tonne and $23,600/ tonne. Purely from a technical perspective, clearance of this area would suggest the rally might rechallenge the high ground. However, we believe that this would be too much to ask in the prevailing risk-averse environment dominated by concerns about the euro-zone and China. Furthermore, nickel s forward backwardations are widening again and that suggests forward selling which might become another head wind. This would be consistent with our view that the peak in prices for this year has already been seen and that the second half will be a weaker period because the main thrust of restocking would have passed and supply should be improving. Near-term fundamentals still seem strong For the time being, nickel s fundamental indicators still look bullish. Premiums remain strong, the downtrend in LME stocks continues, and cancelled warrants have picked up into the price weakness. However, these are barometers of current or very near-term fundamentals. Forward indicators are increasingly painting a mixed picture. but cracks are starting to appear There is a growing consensus expecting a weak period for nickel prices in the second half of the year. Widening forward backwardations, suggesting a bias towards forward selling, support this view. Vale Inco management and unions seem to be getting round the negotiating table again, which could finally end the year-long strike in Canada and accelerate the company s efforts to restart capacity by other means. In addition, latest data shows that Chinese imports of refined metal have slowed while ore imports have risen, further suggesting that primary metal is increasingly being substituted for nickel pig iron (NPI) in China. and H2 looks fundamentally weaker The second half of the year is usually a time that sees nickel stocks rise, putting prices under pressure. This year the main thrust of restocking in the stainless steel industry is likely to run out in the coming month or two as the summer slow-season approaches, and it looks like supply (both conventional and NPI in China) will be rising quickly at the same time that demand is moderating. Global refined nickel supply-demand balance ('000 tonnes) and base case price forecasts, f 2011f 2012f Year Year Year Year Year f f f f Production 1,373 1,212 1,321 1,359 1, % change year-on-year -5.7% -11.7% 9.0% 2.9% 4.5% -0.3% -3.5% -9.5% -9.4% -13.8% -16.7% -11.1% -4.6% 3.9% 9.4% 12.5%.3% Consumption 1,294 1,160 1,336 1,370 1, % change year-on-year -5.1% -.4% 15.2% 2.5% 4.7% -6.1% -3.1% 6.9% -17.2% -26.9% -19.9% -7.7% 20.4% 25.6% 22.4% 8.3% 7.1% Balance % of consumption 6.1% 4.5% 1.1% 0.8% 1.0% 0.8% 3.8% 2.2% 20.7% 19.0% 7.9% 1.7% 4.3% 1.5% 3.5% 2.2% 1.4% Reported stocks Weeks consumption LME cash price $/tonne 21,117 14,649 20,994 20,125 23,000 28,863 25,730 18,961,913,460 12,992 17,601 17,543 20,7 24,000 20,500 19,400 $/lb

14 Molybdenum highlights 20 Ferro-Alloys Market Tracker 13 Demand falls as euro weakens US molybdenum now trading at a premium to Europe Chinese molybdenum concentrate prices dip Market Outlook European FeMo prices, $/kg Ferro-molybdenum prices have declined slightly as European buyers tread more cautiously amid fears of Greek debt. The weak euro has also pushed many wouldbe buyers to the sidelines. Despite this decline in consumption, material in Europe remains tight as many producers have chosen to limit supply to the spot market and focus only on fulfilling their long-term contracts. We believe that this dynamic has kept the market in balance and prevented a collapse in minor metals. European ferro-molybdenum and oxide is trading at around $41/kg and $17/lb, respectively, and we expect these prices to remain stable. The European crisis has had repercussions on overseas markets. In China, the drop off in European demand has resulted in Chinese domestic consumers reducing their demand in anticipation of lower prices. Similarly in the USA, while the market is short of material, the discrepancy between US and European ferro-molybdenum prices is already 18%, therefore if the US market has further price gains, it could result in many US consumers switching to European molybdenum. European molybdenum slips on Greek debt fears European prices have fallen to $ /lb for drummed oxide and $40-41/kg for ferromolybdenum as buying activity has diminished. Buyers have become more cautious following the debt crisis in Greece and prefer to secure long-term contracts over spot market bids. Though spot buying has diminished and price offers have been extremely low, with drummed oxide offers at $ /lb, there is still not much material available, which has enabled the market to remain relatively stable during this time. Briquettes are still especially tight and are commanding a premium of $ /lb. Owing to the limited expected production of briquettes we do not expect that this premium will abate over coming weeks. There has however been some buying interest from Korean consumers with ferro-molybdenum tenders occurring at slightly above $41/lb, though this did not have any impact on the European market. We believe that, while fundamentals support strong Korean demand, this was a one-time transaction and therefore will not be sufficient to prop up the European market. Despite European economic fears, we are cognisant of the fact that is typically characterised by low buying levels owing to the number of European public holidays which limits the number of trading days. We therefore expect that the market is reflecting this seasonal influence, and will improve in the coming weeks. With limited demand balanced by limited stock levels we expect that the market will remain stable at these levels. Ferro-molybdenum prices, $/lb European and Chinese prices falter, but US prices remain buoyant 40 and has a knock-on effect in the east Asia Negative market sentiment in Europe has spread to China causing Chinese molybdenum prices to fall. Chinese molybdenum concentrate prices softened to RMB2,280-2,300/mtu ($ /mtu) from RMB2,300-2,320/mtu a month ago. Demand from Europe for Chinese molybdenum has declined as consumers adopt a wait-and-see attitude in order to get clarity of the European market. In addition the plethora of European public holidays in has reduced the number of trading days, further affecting overseas demand European Free Market US Free Market Hong Kong Free Market

15 14 Ferro-Alloys Market Tracker 20 In turn, domestic consumers have recognized the absence of International consumers and are therefore waiting for prices to decline before placing their bids. Last month Chinese sellers were standing firm on their offer prices, however this month it seems that they may be forced to buckle. We expect prices to decline marginally by -15% in order to entice domestic consumers. While US traders enjoy hefty premiums US molybdenum prices have firmed as three major US producers, namely Thompson Creek, Climax and Kennecott, reduced their output. Thompson Creek has built up 6m lbs of inventory to see the company through its five-week maintenance shutdown in and still meet the needs customers with long-term contracts. We believe that it is therefore unlikely Molybdic oxide prices, $/lb Mo Molybdic oxide prices are holding steady on limited supply that much of this material will find its way into the spot market which will result in increased material tightness throughout this month. Additionally both Climax and Kennecott have indicated that they are low on inventories and may not be offering as much metal to the spot market as has previously been the case. Moreover tightness in the US (molybdenum-bearing) scrap market has resulted in producers having very few options with respect to procuring high-quality material. We believe that the US market will remain firm, with molybdic oxide and ferro-molybdenum trading at $ /lb and $ /lb respectively. This represents an 18% premium over European ferro-molybdenum and a $ /lb premium compared to European oxide. We therefore do not believe that there is room for further price gains as consumers will begin switching to European material, of which there is more supply available. General Moly project Mt Hope construction will commence in 2011 On 13, General Moly announced that it had secured the necessary funding for Mt Hope and is intending to commence construction of its 30m lb per year molybdenum deposit. Production is expected to come on stream by early We estimate that at full production this project will add approximately 6% to global molybdenum supply and 18% to US ore production. The project has 0% offtake commitments for the first five years from Asian customers which we believe will alleviate the tightness in the US market as presently Asian and US consumers are competing for the same material. The material will be priced according to a formula of 25% of $ /lb and 75% at spot less a slight discount European drummed US canned Primary Molybdenum Supply-Demand Balance (million lb Mo contained) 20 e e e f 20f f f f f 20f Global Consumption Global Supply Global Mined Production Conversion Losses to Oxide (1.5%) Recovery from Catalysts Total Global Supply Market Balance Price Forecast - European Market Ferro-Molybdenum ($/kg) Molybdic Oxide ($/lb)

16 20 Ferro-Alloys Market Tracker 15 Vanadium highlights Ferro-vanadium prices outpace pentoxide prices US producers struggle to keep pace with rising demand South African producers declare force majeure Market Outlook $/kg European FeV Prices We are bullish on the outlook for ferrovanadium. European stock levels are depleted and material is limited. Similarly in the USA, the chemical industry in particular is short of ferro-vanadium and the largest converter, Bear Metallurgical Corp (BMC) is struggling to keep up with demand. Consequently US consumers are turning towards South African producers to alleviate some of the market tightness, but owing to the Transnet strike, South African suppliers have declared a force majeure. We expect that the force majeure will be lifted by the beginning of June, but the world cup poses a risk of power cuts and supply disruptions. We therefore believe that the vanadium market will remain under-supplied and prices will strengthen by -12% in the near term. Ferro-vanadium climbs, though pentoxide lacklustre Prices of ferro-vanadium continue to improve this month, while vanadium pentoxide went sideways for the third consecutive week. In MBR s view, the main reason for this discrepancy could be attributed to conversion bottlenecks. European 70-80% ferro-vanadium is now trading at $ /kg from $ /kg in April. Vanadium pentoxide prices are unchanged at $ /kg, representing a premium of 3-8%. While the Greek debt crisis has caused some consumers to reassess their positions, we believe that at present the market is still short ferro-vanadium with no signs that these production inefficiencies will abate over the coming weeks. We therefore expect that this gap will persist. We estimate vanadium pentoxide prices will remain firm, while ferro-vanadium prices could gain a further $0.50/kg. Transnet strike results in force majeure The South African freight company is renowned for striking at this time of year ahead of the July wage settlements, but this strike comes at an auspicious time for the industry, just as demand was returning and capacity increasing. We have been told that at present large quantities of South African vanadium is held up at the ports and Vanchem, South Africa s largest producer, has officially declared a force majeure. Meanwhile European stock levels are virtually depleted and there is resurgence in demand from the US chemical industry. just before the FIFA World Cup Despite the Transnet strike, there has been little impact on South African export prices and it is expected that the strike will be over in less than two weeks. Consumers are now turning their attention to power supply during the world cup. Eskom told MBR that they intend to leave industry intact over this period and will instead blackout households. The industry is now operating at the similar capacities to 20 when severe power outages were experienced and we fear a repeat situation, especially as Eskom has sworn to keep the stadiums lit. It is our view that while the industry is presently able to prevent price increases, further supply disruptions will result in price gains of -12% in the near term. US ferro-vanadium also trends higher Following severe cutbacks in capacity last year, US producers have been caught unaware and are struggling to keep pace with renewed US demand. While vast inroads have been made into addressing the order backlogs, the spot market is largely dependent on BMC, a subsidiary of Gulf Chemicals. Gulf Chemicals has come under scrutiny for violating environmental regulations and BMC have held back on expansions until the issue is resolved. Ferro-vanadium prices have remained firm in the range of $ /lb up from $ It is our understanding that while contracts are being filled, the spot market remains tight and US consumers are looking elsewhere for material. With South Africa unable to supply and increased competition from European consumers, we expect prices could strengthen further to $ /lb by early June.