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Prices across Europe's bulk alloy markets continued to slide in the past week, despite a temporary uptick in liquidity, as steelmakers locked in their third-quarter requirements, but many market participants expect prices to strengthen in September as summer ends.
European steelmakers entered the spot market last week to make last-minute purchases for the third quarter, with most seemingly leaving it later than usual amid a falling market. Although underlying demand in Europe is expected to remain depressed for the forthcoming quarter, booked supplies were significantly higher last week, with some lots in the region of 1,000t.
European high-carbon ferro-manganese prices were assessed down at €1,250-1,425/t ddp on 5 July, while silico-manganese sat at a marginal discount of €1,250-1,400/t ddp, falling by around 35pc from early May. Ferro-silicon prices have lately consolidated at €2,450-2,600/t ddp, down by 38pc since early May.
That said, the uptick in liquidity has already begun to subside as procurement managers cover their requirements and summer maintenance begins.
Most market participants anticipate that prices will see some upward pressure in September, provided that demand follows seasonal trends and picks up for the fourth quarter. "Let's close down for the summer and see where we are in September," a European trader said.
In view of the depressed demand outlook for late July-August and ample supply from traders, there is potential for further slight declines in the coming weeks. But set against the balance of fundamentals is the still unanswered question of a price floor.
Bulk alloy prices are still relatively high compared with historical norms. In 2019, ferro-manganese, silico-manganese and ferro-silicon all traded at €950-1,040/t ddp.
In theory, prices cannot retreat to these values, with present electricity costs rallying higher. Argus last assessed over-the-counter base-load day-ahead prices at €303.70/MWh in Germany, €326.10/MWh in Slovakia, and as high as €438/MWh in Italy.
Although if the alloy producers and end users susceptible to these costs take production off line, whether to protect margins or carry out maintenance, then the question of power costs becomes secondary to how low traders are willing to offer in order to clear their positions.
Indeed, one Slovakian producer is understood to have suspended a number of its furnaces on rising energy costs and weak summer demand. One end user voiced concerns that certain European alloy producers may struggle to weather the storm and return to the market if prices decline further. ArgusMetals
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