Minor metals markets brace for Jan shipping disruptions

Spanish Market: Metals
22/12/23

Disruption to shipping in the Red Sea from increased attacks on vessels by Yemen's Houthi rebels drove higher prices for multiple minor metals this week, on the rise in freight costs and fears of tighter availability, but market participants expect to see the actual effect of the delays in January.

Leading international shipping firms have suspended container services through the Red Sea in the wake of attacks on vessels by Yemen's Houthi rebels. For safety reasons, carriers will go around the Cape of Good Hope to avoid the Suez Canal, the shortest route from Asia to Europe.

The voyage between Shanghai and Rotterdam in the Netherlands is 32pc longer if taken via the Cape of Good Hope instead of the Suez Canal. This diversion from the Suez Canal will increase the duration of the voyage by 10-15 days and reduce effective capacity, market sources said. Consequently, there will be more pressure on the global supply chain.

Freight rates from China to Europe were indicated today at $3,000-4,000/fcl compared with about $800 earlier this month. Companies are also increasing surcharges. As a result, manganese flake, magnesium and silicon prices have already found support.

The manganese 99.7pc flake assessment increased sharply on Thursday to $2,050-2,150/t du Rotterdam from $1,950-1,980/t du Rotterdam on December 19.

Magnesium, likewise, jumped by 9.5pc to $3,350-3,550/t du Rotterdam on Thursday from $3,100-3,200/t on December 19. Offers for January shipment were reported up to $3,300/t cif Rotterdam, and some traders expect that in-warehouse material could soon command prices upward of $3,600/t.

Silicon also rose, additionally bolstered by non-shipping factors. Argus assessed 5-5-3 grade €20/t higher on Thursday at €2,400-2,500/t ddp Europe works.

Manganese and magnesium markets are usually the first minor metals to react to logistic disruptions because of their heavy dependence on China. However, even the effect on magnesium and flake prices in Europe has been mitigated by weak end-user demand as market participants wind down for Christmas.

The balance between supply and demand in early January will determine how markets react.

One market that could also be affected is antimony. European antimony prices are in the middle of a price rally owing to very tight availability. The Argus assessment for trioxide grade du Rotterdam moved up to $11,500-11,900/t today from $11,300-11,850/t earlier this week. Grade II rose to $11,500-11,900/t from $11,300-11,800/t. China has increased offers and very low inventories are on the ground, so shipping delays will add to the tightness, providing upward momentum. Sellers are reluctant to offer based on higher replacement costs and uncertain availability.

"There is no impact yet ... but [the reroute] may add 20 days to shipments, and costs will go up… I am not willing to sell any of my material until January," a European trader said.

The already volatile molybdenum market is also vulnerable and some sources said that disruptions could cause another price spike because some shipments from South Korea are reportedly delayed.

The cobalt market is also monitoring the situation, even though prices have not risen in Europe because most consumers are still reluctant to restock in large quantities, and some traders are offering material to get it off their books for the end of the year. Cobalt prices stood flat today at $13.50-15/lb for chemical-grade metal and $16.20-17.50/lb for alloy-grade metal.

Many participants across the affected metals space are concerned about severe congestion and ports clogging up off the back of the shifting trade flows. Market sources said that ports in Africa could be a problem because of the need for more equipment to refuel ships. Durban is Africa's most advanced port, but it could have issues with replenishment. Other deepwater ports in Kenya or Tanzania are not equipped to handle the expected traffic over the next few weeks.

By Cristina Belda

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