Supply constraints support European silicon carbide prices

By Sofia Okun
Published: Tuesday, 17 May 2022

Multiple market drivers are supporting silicon carbide prices.

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.

 

Silicon carbide, refractory grade 98% SiC min, ddp Europe, €/tonne