Worries about the war in Ukraine and logistics from China
continue to support silicon carbide prices in Europe, but
further price increases are likely. In late April, prices
remained stable at a high level with recent shocks putting the
market on pause.
The price of silicon carbide, used in refractories and
abrasives, has been steadily rising since autumn 2021. The
price of silicon carbide, refractory grade 98% SiC min, ddp
Europe, stood at €2,100-2,400 ($2,188-2,500) per tonne in
late April – almost double its level a year ago,
according to Fastmarkets’ assessments. The price
had not changed from the previous month. "We have reached a
point of stabilizing prices," a European producer source
said.
Some consumers have reported getting an offer for this
grade at €2,600 per tonne, but at the end of April this
level seemed to exceed their budgets. "This is too high," one
of them said. "Supply is the main issue," a European consumer
told Fastmarkets.
Conflict adds pressure
Since February 24, when the Russian army invaded
neighboring Ukraine, silicon carbide volumes from both
countries have become harder to source, market participants
told Fastmarkets. There has been a lack of silicon carbide in
the European market since several months before the war, and
the war has made it worse, one seller said.
One of the largest Russian producers is Volzhsky
Abrasives Works, a subsidiary of international abrasives
manufacturer and supplier CUMI, with headquarters in
India.
Since large container-shipping companies stopped
delivering cargoes to and from Russia in early March, it has
been difficult to ship material out of the country this
spring.
A representative for CUMI confirmed that logistics
challenges have posed difficulties in moving material out of
Russia. But supplies from Volzhsky Abrasives Works "are being
made to countries which do not have any restrictions on dealing
with Russian material or companies, though the logistics costs
are higher due to the current situation," they
added.
Apart from the war, the market also remains
constrained because of logistical issues in China and increased
costs for European producers.
Slower deliveries from
China
A large supplier of silicon carbide, China is seeing
logistical issues driven by Covid-19 and the
country’s policy of zero tolerance toward it.
Shanghai and northern industrial provinces such as Liaoning
experienced widespread restrictions and lockdowns this spring,
which has affected the timeline for delivering
cargoes.
"It takes four months for material from the factory
[in China] to reach ports in Europe," another market
participant said in late April. In that month, China-based
producers sent offers that were valid for a few weeks, a
European buyer said. He sees that as a sign of
producers’ confidence: sooner or later, the stock
would reach foreign destinations.
Several traders and consumers agreed that the issues
of Chinese logistics and disrupted supplies from Russia and
Ukraine have become the main factors supporting the price of
silicon carbide products.
European production costs
soar
Costs of energy and petroleum coke add to the picture,
market sources said. "European producers are not producing
enough - little supply is coming from them," one market
participant said.
The situation has been getting complicated even
without the conflict in Ukraine, due to increased costs for
energy – mainly natural gas and electricity –
and petroleum coke, which is used as a raw material in silicon
carbide production.
Electricity prices in Germany have been climbing.
According to data from Statista.com, industrial electricity
prices, including electricity tax, reached 26.64 cents per kWh
in Germany in January 2022, compared with a peak price in 2021
of 21.38 cents per kWh.
About half of Germany’s imports of gas
and hard coal originate from Russia and the country depends on
Russia for about one-third of its total energy consumption. The
silicon carbide market could face "a perfect storm" if
petroleum coke and natural gas prices do not soften soon, a
producer source said in March.
Sustained demand
Demand for refractory products, including silicon
carbide materials, has not dropped much, despite the economic
headwinds facing the global steel industry, which is the main
consumer of silicon carbide products.
In March 2022, global crude steel output decreased by
7% year-on-year to 161 million tonnes, with all regions except
South America reporting drops in production, the World Steel
Association reported.
Germany showed the largest percentage decline in the
month among the top 10 steel-producing countries, down by 11.8%
to 3.3 million tonnes, mostly due to the surge in energy prices
and the raw material supply chain disruptions.
Nevertheless, several market participants described
demand for silicon carbide as outpacing supply. "It is a very
dynamic market," a European producer source said.
