Pierre Kolingba-Froidevaux

KREATIZE & Metalshub Market Report June 2022

After difficult months in the first trimester of the year, overall market stability has started to increase. Signs of relaxation can be seen in many markets and industries, ranging from material prices to freight rates. Many logistics and transportation companies have reacted to the war in Ukraine, setting up new routes that bypass Russia. The Covid-related lockdown in Shanghai, China, though still ongoing, is likely to end at the beginning of June, providing hope for a normalization of global supply chains. On the other hand, energy prices in Europe are still high and show no signs of recovery to pre-war levels, but continue to drive inflation rates.

Materials

Material prices have retreated for the second month in a row and are on the way back to pre-Ukraine war levels.

Aluminum prices in May have decreased by 6%. The price of Nickel decreased by 10% in May while steel prices even decreased by 20% to 920€/t for EU-hot rolled coil. Aluminum, Nickel and steel all reached price levels last seen in January 2022 (as of CW22). 

The speculative rise in nickel prices that started at the end of February finally collapsed. Against the backdrop of weak demand in China and negative market expectations in Europe, the metal became cheaper in May. The average premium to the exchange price of nickel briquettes on Metals Hub has almost halved. Nevertheless, the premium remains at least twice as high as at the beginning of the year.

The good news is that most base metals have seen their price peaks in March, but have started decreasing again despite the ongoing uncertainty in the markets. Many base metals have already returned to their pre-war price levels, reducing the price pressure on materials.

Ferroalloys

The rapid appreciation of many ferroalloys in March and April, triggered by fears of shortages due to discontinued supplies from Ukraine and Russia, appears to have exhausted itself by May. In some segments, there has been an increase in supply from alternative regions, but in most markets, consumers have been extremely inactive, so by and large the ferroalloy markets have entered the traditional summer lull a month earlier than usual. 

Manganese ferroalloys and ferrosilicon prices dropped by 25-30%, ferrovanadium by 10%. Ferromolybdenum prices were largely unchanged, with the Metals Hub index recording only slight downward deviations from April levels. 

Meanwhile, low-carbon ferrochrome prices continued to rise in Europe amid stable consumption and limited alloy supplies from Russia due to imposed sanctions. In other regions the shortage is not so strong (US) or the market is even oversupplied (Asia), so the price trend there was rather downward. More data on transaction based price indices and live market insights can be accessed by subscribing to Metalshub price indices.

Energy prices

Energy prices in Europe continue to remain on a very high level. On average, European gas prices increased 13% after Russia has cut its supply to Poland and Bulgaria. In addition, Russia also halted providing gas to its neighbor Finland after Finland applied for Nato membership. As a reaction to the Russian gas cut off, the European Commission made plans to limit the impact of Russia’s actions through joint gas purchases and a possible price cap. Mid-term the EU revealed a distinct plan to end the EU’s dependence on Russian fossil fuels.

Regarding energy prices in Germany, energy suppliers have announced price increases of nearly 19% for the month of June. Compared to the record month of March where megawatt hours traded at 252€ on average, in April a megawatt hour was traded at 166€ on the Leipzig Power Exchange. However, prices remain on a very high level and forecasts predict further price increases. As a countermeasure, the German government decided to abolish the renewable energy law as of July.

Regarding energy prices in Poland, prices in April increased by 21%. Despite rising energy prices, the impact on the Polish economy is moderate so far, although Poland faces a very high inflation rate that originated in rising energy prices.

Logistics 

Multiple shipping and transportation companies have reacted to the war in Ukraine and China´s zero-covid strategy by launching new routes from China to Europe. Danish shipping company Maersk has launched an updated rail service that connects China and Europe via Azerbaijan. Finland’s largest freight operator Nurminen Logistics announced the launch of the first container route from China through Kazakhstan and Azerbaijan, allowing it to bypass Russia. Chinese company Nippon Express launched a new intermodal route from China to Europe via Mongolia, passing via the Caspian sea. 

The fast reaction and implementation of new routes by many companies indicates a new era of transportation routes. Global logistics is on its way to recover from difficult times. 

Demand for air cargo planes en route from China to Europe increased throughout May. Flight capacity recovered gradually, too.

Manufacturing lead times

The lockdown in Shanghai is about to end. Shanghai authorities plan to emerge from restrictions in phases while aiming to return to normal life by June. The Shanghai lockdown had created large effects on the global economy and increased uncertainty about lead times. While Shanghai’s ports are back up and running at 90 per cent capacity, this also led to a normalization regarding wait times of trucks, trucking capacity and containers while also improving inland operations. Between March and April, the Shanghai port saw a 175% increase in container dwell time, meaning ships needed to wait much longer to take on cargo.

At KREATIZE,  manufacturing lead times remain stable since the beginning of the year. This can be achieved thanks to KREATIZE´s global network of manufacturing partners.

Contact our sales teams by email for detailed advice and assistance on product, supply-chain and/or material issues.

This report was created in collaboration with Metalshub. Metalshub is the global leading supply chain solution for metals.
For more information, you can visit metals-hub.com or reach out directly via info@metals-hub.com.

You do not want to miss any market reports? Subscribe to receive KREATIZE market reports via email:

KREATIZE & Metalshub Market Report May 2022

The war in Ukraine and Covid-related lockdowns in China are still dominating the news and continue to affect global supply chains, material prices and market stability. In addition, high inflation has an influence on many different industries. As a consequence, interest rates at European banks are on the rise after the US Federal Reserve has increased its interest rate by 0,25% for the first time in years. Despite these factors, prices for materials such as ferroalloys and oil have been decreasing since they reached their peaks in March.

Materials

Material prices have retreated after all time highs at the beginning of March. Still, prices remain at a high level.

The German Trade Association Metals warns of magnesium bottlenecks in Germany and Europe. Magnesium is essential for the production of aluminum. Despite this, Aluminum prices have decreased by 17% since their peak and almost returned to the price level before the war in Ukraine began, the price of Nickel even decreased by 45% and seems to have stabilized, not long after trading of it at the London Metal Exchange (LME) was halted in CW10. Steel prices also decreased by 17% to 1.335€/t since the peak price for EU-hot rolled coil, but remain at a very high level (as of CW16).

Nickel prices declined slightly in April, although they remain at historically high levels. Thus, the average premium to the LME price of nickel briquettes on Metalshub decreased by 350$/mt, but is still four times higher than the average of January and February.

The good news is that most base metals have seen their price peaks in March, but have started decreasing again despite the ongoing uncertainty in the markets.

Ferroalloys

In April, the European and global ferroalloy markets were characterized by contradictory sentiment and, consequently, price trends. On the one hand, the risk of shortages of some ferroalloys remains on the markets amid the Russian-Ukrainian war. On the other hand, steel production in key countries is declining. Despite good steel consumption figures, steel production in the EU fell by 8.5% in March, while in the first quarter the figure fell by 3.8%. This has a negative impact on the demand for ferroalloys.

Russian supply of ferroalloys to Europe is now hampered by unprecedented sanctions that restrict export opportunities for businesses in Russia. As a result, throughout April the prices of many ferroalloys continued to rise in Europe. These include high-carbon ferrochrome, which rose by more than 30%, ferrotitanium (+18%) and ferrosilicon (+13%). In the case of the latter, the increase in prices was due to the war in Ukraine (one of the key FeSi exporters to the EU market) and the delivery challenges amid the military blockade of Ukrainian seaports. More data on transaction based price indices and live market insights can be accessed by subscribing to Metalshub price indices.

Energy prices

Energy prices continue to remain on a very high level. Regarding energy prices in Germany, energy experts are no longer assuming a short-term fluctuation, as two key factors for electricity price development will not bring any relief in the foreseeable future. First, the electricity price is particularly strongly influenced by the tense situation on the gas market. Gas storage facilities are emptying seasonally, demand on the gas market remains high, and supply volumes from Russia continue to be low because the start of Nord Stream 2 commissioning has been suspended. This is driving up the price of gas and thus making it more expensive to generate electricity from gas. This results in the second key factor: CO2 tax. If gas is too expensive and less energy is produced with renewable sources, emission-intensive energies have to step in to close the electricity gap. This makes electricity more expensive due to the CO2 tax.

Regarding energy prices in Poland, the country faces more uncertainty after Russia halted gas exports to Poland (and Bulgaria) on April 27th after they refused to pay for supplies in Russian rubles. Although Poland was already planning to stop importing Russian gas by the end of the year, this action puts more economic pressure on the country.

Logistics

The war in Ukraine and China’s zero-covid strategy are causing turbulence in global supply chains. Covid levels are rising in Shanghai and other cities in eastern and western China. This is affecting production facilities, warehouses and truck availability. However, ports are still operating. While the cities of Shanghai and Guangzhou remain in lockdown, their ports remain operational, although they are becoming increasingly congested as trucking is severely constrained and many warehouses are closed since late March. China relies heavily on trucking to move raw materials from coastal ports to the factories further inland. As the container backlog increases, a threat of further delays and increasing freight rates in the future exists. Currently sea rates remain stable, although on elevated levels.

Air cargo planes en route from China to Europe are heavily impacted by the lockdown, too. From Shanghai airport, 80% of commercial air freight services have been canceled. Operators are struggling to shift to other airports nearby.

Manufacturing lead times

Due to the lockdown around the large ports of Shanghai and Guangzhou, lead times from China to Europe are hard to predict. While the ports operate normally in closed-off systems where they are sealed off from the city, trucks face difficulties when entering and exiting these systems. As of CW16, lead times have increased due to longer shipping times. Wait times of trucks, container shortages or shipping delays all pose further potential risks regarding the prolongation of lead times.

At KREATIZE, manufacturing lead times remain stable since the beginning of the year. This can be achieved thanks to KREATIZE’s global network of manufacturing partners.

Contact our sales teams by email for detailed advice and assistance on product, supply-chain and/or material issues.

This report was created in collaboration with Metalshub. Metalshub is the global leading supply chain solution for metals.
For more information, you can visit metals-hub.com or reach out directly via info@metals-hub.com.

You do not want to miss any market reports? Subscribe to receive KREATIZE market reports via email: