Strong call-offs on metals, ferro-alloys amid logistics disruptions on coronavirus spread to Europe

Metal and ferro-alloy suppliers in Europe are reporting strong call-offs on sales to European consumers, some of which are stocking up in preparation for any disruptions that might be caused by the spread of the novel coronavirus infection (2019-nCoV).

Cases of the disease caused by the virus emerged in Wuhan, China, last year and have now spread to Europe, with Italy being hit hardest. There had been more than 300 cases in the Southern European country by Wednesday February 26, resulting in quarantine zones and road closures.
Reports of strong call-offs or stocking-up by consumers, or both, have come from suppliers of silicon metal, cobalt, manganese alloy and ferro-chrome.
“We are seeing stronger call-offs - not huge, but stronger - from stainless [steel] mills trying to replenish [their inventories] a bit more just in case. This is mainly for silicon metal,” one supplier of multiple commodities told Fastmarkets.
“There are quarantine zones in northern Italy which will affect deliveries, and we fear that transportation companies will say their drivers don’t want to go there in case they get stuck there,” the source added. “Some customers are asking us for more material in case it doesn’t come via northern Italy, but Italy is not going to shut down completely.”
Traders in the European aluminium market have also reported logistical issues in Italy concerning both trucks and vessels.
“Transportation is the problem when areas are under quarantine. Drivers don’t want to truck metal around right now [because] it is too risky,” a European aluminium trader said.
“My clients in Italy are telling me that truck drivers are refusing to work. We have metal stuck in places and cannot get it to end-consumers, [so] local suppliers will raise their prices,” a second aluminium trader said.
Fastmarkets assessed the aluminium P1020A premium, fca dp Italy, at $180-185 per tonne on February 25, but on Wednesday some deals were reported at $190 per tonne in the Trieste region.
Silicon and ferro-silicon prices have been rising in Europe for weeks because of production shutdowns and more recent difficulties in obtaining material from China.
Fastmarkets’ price assessment for silicon, grade 4-4-1, 99% Si min, in-whs Rotterdam, rose to €1,900-1,945 ($2,063-2,112) per tonne on February 21, from €1,875-1,910 per tonne the week before.
Strong call-offs have come despite concerns that the spread of the coronavirus infection will hurt economic growth and demand later in the year. In the cobalt market, sources have reported buyers declaring maximum tonnages on their annual contracts for February, March and further forward.
Some have requested additional volumes on contract terms – in preference to buying in the spot market – or have brought forward deliveries previously agreed for dates in the future.
Long-term contracts signed for 2020 included favorable terms for cobalt buyers. Late last year, sellers offered appealing discounts against Fastmarkets’ benchmark price assessments in order to entice buying, at a time when downstream demand was unclear and consumers had little appetite to take a risk and sit on stock that might not be needed.
While call-offs showed that buyers were looking to bulk up their stock on preferable formula terms, the spot market has been thinly traded in February, because the spread of the coronavirus has raised concerns about a possible economic slowdown in the coming months.
Price moves in cobalt have been relatively conservative, with cobalt, standard grade, in-whs Rotterdam, trading at $16.95-17.35 per lb and cobalt, alloy-grade, in-whs Rotterdam, at $17.65-18.25 per lb, according to Fastmarkets’ assessments on February 26. These were up from $16.50-16.90 per lb and $17.40-17.80 per lb respectively at the beginning of the month.
“[Without the effects of the coronavirus, prices in] the $16s [per lb] would have been left behind weeks ago,” a trader source said.
Ferro-manganese prices have also risen in Europe in recent weeks, which has been attributed to renewed demand and not linked to the emergence of the infection, but there have been reports of buyers trying to plan for potential disruption.
“Call-offs are a little stronger on manganese alloy. I think consumers are stocking up under a contingency plan,” a manganese alloy supplier said.
Fastmarkets’ latest price assessment for ferro-manganese, basis 78% Mn max, standard 7.5% C, delivered Europe, was calculated at €920-960 per tonne on February 21, up from €880-920 per tonne at the start of the year.
Ferro-chrome suppliers have also reported strong call-offs but were less sure whether the virus was a factor.
“Call-offs remain strong so far,” a ferro-chrome supplier said, accepting that the effect could be caused by the virus.
But others in the market played down the consequences of the virus spreading into Europe.
Some Italian metal consumers have moved to reassure their counterparties that they are operating as normal, sources said.
“Our trucking companies are still delivering to Italy and around Europe, with no objections or price increases,” a second ferro-chrome supplier said, adding that steel mills in Europe were receiving more orders from stockists which wanted to reduce their exposure to Chinese material.
And a ferro-chrome trader said that his company had seen no change so far.
In a note to customers on February 25, seen by Fastmarkets, a major London Metal Exchange-listed warehouse in Italy also told its customers that there was no disruption and that warehouses and terminals were currently operating as normal.
It said that vessels, trucks and trains were at present not subject to any restrictions and were working normally to and from all destinations.
 

Janie Davies

jdavies@fastmarkets.com

Charlotte Radford

charlotte.radford@fastmarkets.com

Alice Mason

alice.mason@fastmarkets.com

Published

Janie Davies

Charlotte Radford

Alice Mason

February 26, 2020

19:40 GMT

London