Silicon metal prices in Europe to stop dropping
----Interview with Joanna Kapplmann
General Manager
Deutsche Erz-und Metall-Union GmbH
- Deutsche Erz-und Metall-Union GmbH (DEUMU) is a wholly-owned subsidiary of the Salzgitter Group which is one of the leading steel technology groups in Europe. With over 400 employees, the company obtained an annual turnover of about 954 million Euros in 2022. For more than half a century, the company has gained experience in trading, processing and recycling of raw materials and built up decent competence.
- Asian Metal: Welcome to the interview by Asian Metal, Joanna. Please introduce your company briefly.
- Joanna: DEUMU GmbH is a trading company established in 1941, which is a subsidiary 100% owned by the Salzgitter Group. With 468 employees, DEUMU generates an annual turnover of about EUR 950 million in 2022. The core business is trading, processing, and recycling scrap material used in the production of steel manufacturing. The trading department is called "Non-ferrous Metals and Ferroalloys", and we have six employees who mainly focus on selling ferroalloys, manganese, magnesium metal, manganese metal, Silicon metal. We're also active in business of deoxidizing aluminum, secondary aluminum alloy ingots and zinc ingot.
- Asian Metal: What's your basic monthly or quarterly trading volume of silicon metal and which industries are your clients from?
- Joanna: DEUMU's rather moderate trading volume of silicon metal is about 500t a quarter in a normal financial year. We are supplying mainly to medium-sized silicon metal consumers in Europe and they are from different sectors such as aluminum-industry, automotive industry and other non-ferrous metallurgical application fields.
- Asian Metal: Regarding silicon metal, how about the current prices of silicon metal 5-5-3 in Europe now (22th Aug)? Do you think China-origin silicon metal prices keep competitive in Europe now?
- Joanna: The fact is that prices of silicon metal, especially for silicon metal 553, kept dropping every week since the beginning of Q2 in Europe, and the price today is below €2,000/t DDP Western Europe (22th Aug). I remember last year that the prices of non-China-origin silicon were about €200-300/t cheaper than those of the China-origin material. Consequently, it made no sense for us to purchase directly from China since the second half of 2022. But since the beginning of the first half of 2023, the China-origin silicon prices, even calculated with the anti-dumping duty of 22.3% in Europe, were definitely more competitive against those of non-China-origin material in Europe. The reason could be China's strong market position in silicon metal and the financial support to local produers by the Chinese Government at the beginning of 2023. But since July there was at least one Scandinavian silicon metal producer that started to compete with China-origin silicon metal by offering lower prices for different silicon metal qualities due to decreased demand in Europe, and some of their aggressive prices became about €100-150/t lower than those of China-origin material. This is a new situation for the Chinese silicon metal exporters and the question is why and how long the situation will remain and how non-China-origin silicon metal market participants react to survive.
- Asian Metal: How about the demand of silicon metal in Europe in the first half of this year?
- Joanna: Our clients from different industries all maintained regular purchases but with decreased volume this year. We can still receive orders from large aluminum producers but the amout kept reducing. Due to the long-term relationship with our clients, the overall conditions are still acceptable compared to last year even though the demand shrank. Our clients appreciate DEUMU's reliability in quality and delivery. Moreover, the market competition in the first half of this year increased a lot YoY because the buyers become more aggressive when negotiating the prices. and it strengthens the customer's negotiation position. In fact, we found it often that the prices remained unprofitable at all to us if we wanted to close the deal. We had to cautiously consider if we had to close the deal. Based on all these issues, the trading volume of DEUMU has decreased by about 30-40% in the 1st half 2023 YoY. We remain pessimistic about the market outlook and believe that the demand in the rest of the year would not recover to the level in 2022.
- Asian Metal: How about the downstream's attitudes towards the gloomy market? Will they postpone or even cancel their purchases?
- Joanna: We have a well-distributed medium sized customer structure and we haven't seen any cancel of postpone of purchases from those regular clients recently. Some of our clients did cancel or delayed their purchases from late last year to early this year but resumed normal purchases after one or two months. Fankly speaking, some clients cancelled their purchases due to price erosion but they are not our regular clients.
- Asian Metal: How about your opinion about the market outlook in the rest of year? When do you think the inflection point of the price trend would appear?
- Joanna: Our clients are not optimistic due to the continuous energy crisis in Europe. I think the silicon metal prices in Europe, supported by high energy prices, would stop falling in the rest of the year. There might be a small price recovery but I don't see it as an inflection point because the demand in Europe would not recover by the end of the year. Additionally, the Chinese economy has not been fully recovered as expected, which also impacted the European market to some extent. Considering the big price gap between China-origin silicon metal and non-China-origin silicon metal, for Chinese exporters they have to decide whether they could adjust their prices to the current European price level. For importers in Europe, they are facing very difficult situation.
- Asian Metal: Does your company have plan to expand business on new products?
- Joanna: We have no plan to change our core business. In fact, it is unwise to question the business which has been stable and decent in the past 5 or 10 years or to expand new business, especially under the current chaos situations in Europe. Besides, we believe it difficult to start business on new materials due to REACH certification by the EU, which requests a big amount of investment for product registration. According to my experience, all the metal and ferroalloy markets would be affected by the upcoming recession in Europe. We expect that the market would face a small recovery in early 2024 at the earliest. Of course we would like to embrace new projects, but we would rather focus on our current business rather than investments on new business.
- Asian Metal: Thank you for your sharing.
- Joanna: Thank you for your invitation.
