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This month's key ferro-alloy forecast highlights:
While the ferro-alloy industry's initial response to the Covid-19 outbreak was marked by rising prices primarily in response to supply-side concerns, focus has now shifted somewhat. As Chinese activity slowly returns to more normal levels, for alloys with a strong Chinese production presence, we are seeing prices retreating as supply concerns fade. The recent South African 21-day lockdown, however, is increasing concern for manganese ore, chrome and vanadium supply.
Industrial activity is resuming in China, with positive implications for ferro-alloys demand. Elsewhere, however, the industrial outlook is significantly worse, with Europe and the US both struggling to contain the spread of Covid-19. Automakers and steelmakers are both imposing temporary production cuts, with negative implications for ferro-alloys demand.
As highlighted previously, with China accounting for both the vast majority of ferro-alloy supply and demand globally, developments within China will profoundly affect ferro-alloy markets. Our base forecast assumes higher near-term prices for manganese ore and alloys, while other markets may struggle until the full magnitude of Chinese stimulus efforts are apparent.
Global chrome markets have been a relative area of calm since mid-2019, with price moves increasingly limited and finding little room to head even lower after hitting multi-year lows. Production cuts among key producers had increased as the market looked to be moving closer to balance and there was discussion that prices may even spike should demand resurge later this year, primarily from Chinese buyers. With the market thus already heavily sold off, chrome price falls have been limited over the past month, even as investors liquidate many of their assets for cash.
Silicon metal consumption is poised to struggle in the near term as a result of Covid-19 disruptions, with demand declining from both of silicon metal's key end-use sectors - the secondary aluminium industry and the chemical sectors. Automaker shutdowns in response to the virus crisis will impede demand for secondary aluminium, while crashing oil prices will make oil-based chemical products increasingly competitive versus their silicon metal-based silicone alternatives.
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