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Barge congestion and Midwest deep freeze slowing US ferroalloys movements: sources

  • Author
  • Anthony Poole
  • Editor
  • Annie Siebert
  • Commodity
  • Metals Shipping

New York — Congestion on the Mississippi and Illinois rivers and plummeting temperatures and snow and ice in the Midwest are holding up ferroalloys movements, although prices of these commodities have, so far, not been affected, market sources said Tuesday.

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High water levels on the lower Mississippi -- a problem since mid-December -- and worsening ice conditions on the Illinois River have resulted in smaller-than-usual convoys of laden barges moving north.

Watco, a major logistics, warehousing and railroad freight loading operation, is closing its railroad loading facility in Chicago on Wednesday because of forecasts for extremely cold temperatures, according to letters to customers seen by S&P Global Platts. It is planning to resume operations on Thursday. Forecast temperatures in Chicago are expected to plummet to a record overnight low of minus 22 degrees Fahrenheit (minus 30 degrees Celsius) on Thursday night into Friday morning, potentially making it colder than Antarctica, according to meteorologists.

High water on the lower Ohio River over the weekend has reportedly receded, and barges were said to be moving again after some delays, but in smaller-than-usual convoys.

Two ferroalloys traders said they had been advised that the high water conditions in the lower Mississippi had resulted in barge convoys being limited to five to 10 barges, instead of the more customary 12, and some areas were restricted to navigating in daylight hours only.

In the Illinois River, ice has been reported at 5-6 inches thick in the Peoria Lake area, with parts of the river re-icing over after every passing barge. Current predictions suggest temperatures in most of the Illinois River are unlikely to rise above freezing over the next 30 days.

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A trader said he had raised his prices for spot high-carbon ferromanganese "without resistance" because of the river conditions. He sold a single truckload to another trader at $1,350/lt, in-warehouse basis, up from previous sales of $1,330 and had other offers out at the $1,350 level. The price falls within the existing Platts weekly assessment range of $1,300-$1,370/lt, in-warehouse major US hubs. The market will next be assessed Wednesday.

Another trader said prices of ferromanganese had not really moved and thought there was enough material in key warehouses to cover any spot needs. Traders and suppliers reported varying degrees of impact from river congestion. Some said they had seen some delay, while others had not seen an impact, but expected to.

"We've had a few barges that have been slow to get from the Mississippi River into the Ohio River, but we also have barges further north on the Ohio River, so we don't see too much delay," said one trader. "But if the problems persist, the real problem might be getting enough barges back down to New Orleans to load next month or in March."

Another trader said he had not been affected, so far, "but if this continues, then we will be. I just hope we don't get to a situation, where we have to offload off stuck barges halfway up the river onto trucks." He said truck availability was already tight in normal conditions, but would become much worse if there was a prolonged freeze in the Midwest.

But a third supplier said he had most of his first-half year requirements already in warehouses and available spot units "if people really need it." He also thought some suppliers might use the situation as an excuse to raise spot prices for high-carbon ferromanganese after several entered into long-term formula contracts at hefty discounts to independently published average prices, including those published by S&P Global Platts. Some of those discounts were between 8% and 10%, with isolated cases of up to 12%. "Those discounts are killing [those suppliers]" said a fourth trader. "They'll do anything they can to try and get their formula base prices up."

High-carbon ferromanganese is seen by some sources as potentially vulnerable to price increases, because of the US domestic production that goes into refined ferromanganese. Likewise, high-carbon ferrochrome and charge chrome could also be affected by barge congestion as the US has no domestic production. There are two domestic producers of silicomanganese -- Eramet and Felman -- both of which are on the Ohio River, but they could run into problems with deliveries of manganese ore, all of which is imported, if the congestion lasts long enough, sources said.

A steel mill buyer said he was not concerned by the issues on the river. "The problem is for the suppliers, especially on imported alloys," the buyer said. "They can't declare force majeure, only domestic producers can, if they have to. But most of the US market is supplied with imports."

Another buyer agreed with the sentiment. "The onus is on the suppliers," he said.

"We had this problem four years ago and everyone complained about delays and barges getting stuck in ice, no trucks on the road, frozen fuel lines, then flooding in spring, but we didn't miss a single delivery of anything. The suppliers came through, they may have been a few days late with some things, but they still delivered."

-- Anthony Poole, anthony.poole@spglobal.com

-- Edited by Annie Siebert, newsdesk@spglobal.com