GLOBAL FERRO-SILICON WRAP: Chinese market bounces; tight supply underpins EU, US support

The Chinese ferro-silicon market has bounced in the past week amid producer expectations of stronger monthly tender prices from steelmakers, while relatively tight supplies in Europe and the USA have bolstered support in those markets.

  • China prices recover; stronger May tenders expected
  • US replacement costs seen higher
  • Low alloy availability outweighs quiet demand in Europe

The Chinese ferro-silicon market price increased last week, reflecting higher offers from major smelters in the hope of stronger settled May tender prices from steel mills. Metal Bulletin assessed the ferro-silicon price in China’s spot price at 5,400-5,600 yuan ($782-811) per tonne, up from the previous week’s level of 5,300-5,500 yuan.

“Mills have started their May tenders for ferro-silicon purchase this week so smelters lifted their offers to put pressure on the mills,” a trader in the Chinese province of Ningxia said.

“So far we haven’t heard major mills tender prices yet while the market level indeed moved up slightly in line with increased offers from smelters,” a smelter source from Inner Mongolia said.

The spot ferro-silicon market has been supported by firm longer-term prices. The most-traded September ferro-silicon contract on the Zhengzhou Commodity Exchange ended the week at 5,364 yuan per tonne, up from 5,214 yuan a week previously. Metal Bulletin’s ferro-silicon fob price also narrowed to $1,110-1,160 per tonne on Friday April 28 from $1,090-1,160 per tonne.

“Overseas demand is increasing as we have received an increased number of inquiries recently,” a trader in Beijing said.

A trader in Inner Mongolia agreed, adding that “as far as I know, current market availability is tight in other countries such as Russia, resulting in more buyers turning to China for material”.

In the USA, the ferro-silicon market has been steady in line with dealer sentiment against stronger replacement costs despite subdued domestic spot activity. Spot prices for ferro-silicon increased to 76-80 cents per lb on April 27, up 1.3% from 75-79 cents previously, according to Metal Bulletin sister publication AMM’s latest assessment.

While consumers have been mostly absent from the market, suppliers have increased their offering prices while traders have sought to supplement inventories from domestic stocks.

“We had a couple of traders come to us looking for more material,” a supplier source told AMM. “They were looking for low prices but I wasn’t going to part with material for anything outside the upper-70-cent level.”

“I’m hoping our offer is turned down. I’d rather hold the material and get a stronger price once the market picks up in a few weeks,” he added.

With current replacement costs at prohibitive levels, traders and suppliers holding inventory have been keen to move pricing up in expectation of a stronger domestic prices.

“Apart from producers there isn’t really any source for bringing in material to the USA unless you want your cost basis to be higher than current domestic spot prices,” a second supplier said to AMM.

“The Brazilians are a non-factor at current prices, the Chinese are pretty much out of the market and the Venezuelan operations are shuttered... that is a lot of material to make up in terms of imports,” a third supplier source said.

US ferro-silicon imports from Brazil, China and Venezuela totalled 69,783 tonnes in 2016, according to data compiled by the US Commerce Department and the International Trade commission.

“Kazakhstan and Malaysia are becoming bigger factors but not enough to make up all that shortfall [in supplies],” the third supplier added.

US imports of Kazakh ferro-silicon totalled 5,076 tonnes in the first two months of 2017, after only 323 tonnes in total in 2016. Although only 244 tonnes of Malaysian material were imported to the USA in the first two months of 2017, market participants said that more volumes are expected subsequently. In December last year 1,818 tonnes were imported to the USA from Malaysia.

“With no real options to undercut the market, I don’t see prices for ferro-silicon dropping any lower than they are currently... I think we have seen the bottom on that,” the second supplier said.

Given current trading conditions, available domestic supply in the USA has been tightening, leading suppliers to start to factor in replacement costs.

“It’s quiet right now so prices haven’t fully adjusted to the global market but market activity should pick up in the next few weeks for third-quarter negotiations,” a fourth supplier source told AMM. “I can say that those prices will be a lot higher compared with current indexes.”

The European spot ferro-silicon market has rounded off the month in a steady trend, with prices holding within current trading ranges in week ended Friday April 28. The spot market has been quiet, with the bulk of any business being done in longer-term delivery settlements between producers and consumers, with the occasional deal heard on an inter-merchant basis.

Typically, producers are reporting offer prices towards the top end of the spot trading range, with consumers towards the lower end and traders somewhere in the middle.

“Suppliers have increased their offer prices for 75% grade alloy amid relatively persistent tight spot supplies and limited imports,” one buyer said, adding that producer offer prices were around €1,275-1,350 per tonne.

“However, suppliers are prioritising long-term contract commitments instead of spot sales as consumers are reluctant to accept higher prices on a spot basis,” he said. “Ferro-silicon producers are holding their offer prices despite quiet buying interest as they expect that supplies will be tight in the spot market in the near term.”

One producer source said the spot ferro-silicon market was stable, although there was a scarcity of alloy available. He reckoned that prices were likely to climb in the near term although he had not yet committed to new business.

A consumer source said he had done no new spot business in ferro-silicon, but had heard of offer prices at around €1,225-1,245 per tonne on a delivered basis.

In industry news, Macedonia-based producer Jugohrom Ferroalloys has postponed a potential restart to its idled ferro-silicon production, a senior company official told Metal Bulletin.

The company, which is aiming to produce around 4,000 tpm of standard grade ferro-silicon production, suspended all production last November. Late in January this year, the shutdown was extended for a further 90 days to comply with government-issued environmental standards to reduce pollution.

The European ferro-silicon market is at a level last seen about six years ago, according to Metal Bulletin data, and was reported at €1,220-1,350 per tonne on Friday April 28. The European spot price range was €1,310-1,450 per tonne in May 2011; it had peaked that year in January at €1,450-1,510 per tonne, according to Metal Bulletin data.

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