GLOBAL FERRO-SILICON WRAP: Chinese market climbs again on tighter raw material supplies; US suppliers cut offers to attract spot buying

The Chinese spot price is extending its run higher as ferro-silicon smelters face difficulties in securing raw materials from silica miners who have cut production on environmental crackdowns, while US prices have dropped again amid low levels of prompt demand, although upward international market pressures should stem US price losses.

  • China market pushed up on silica production cuts, with the trend set to persist through November 
  • US suppliers cut offer prices, but support seen on firm import offers 
  • Europe holds again, awaiting new deals

Environmental shutdowns push up Chinese alloy prices
Raw material tightness due to environmental checks has again pushed up ferro-silicon prices in China. Consequently, ferro-silicon smelters are struggling to buy enough raw materials to produce alloy.

Silica miners in the country have been forced to suspend production because of environmental checks, which is set to last for several weeks, sources said. 
Metal Bulletin’s domestic spot ferro-silicon price basis 75% silicon increased to 6,600-6,900 yuan ($999-1,044) per tonne on Friday November 3, up 100 yuan per tonne in a week and 10% higher than in early October. 

Chinese export prices also moved up, with fob Chinese ferro-silicon export prices assessed at $1,350-1,370 per tonne on November 3, from $1,330-1,350 per tonne the week before.

“Many small [silica] mining companies have halted production and are unlikely to resume production soon so supply shortages are likely to last until at least December,” one major ferro-silicon producer said.

“We are feeling pressure to deliver our long-term contracted material to domestic buyers, [so] there will be limited spare volumes for spot sales or for export,” he added.

Meanwhile, one major Chinese ferro-silicon smelter’s current operating rate is below normal because of technical difficulties, which is further tightening supplies.

Still, foreign buyers of Chinese ferro-silicon are taking a wait-and-see approach because of the jump in ferro-silicon export prices from the country, according to one buyer in South Korea.

The Zhengzhou Commodity Exchange (ZCE) ferro-silicon contract has been fluctuating in the past week, with the most-traded January contract hitting a high of 6,746 yuan per tonne on Monday. It closed at 6,474 yuan per tonne on Friday November 3, compared with 6,646 yuan per a week before.

US market slips again; support seen
Elsewhere, the US ferro-silicon market dropped again in the past week, extending price losses amid weak domestic demand. 

US spot ferro-silicon prices slipped to $0.93-0.96 per lb on November 2, down 2 cents from $0.95-0.98 per lb the week before, according to American Metal Market’s latest assessment.

The spot market has been neglected in favor of longer-term negotiations for annual delivery settlements in 2018.

As a result, US suppliers have cut their offer prices to encourage buying interest on a spot basis. The US ferro-silicon market has been weakening in price for four weeks in a row, with prices down more than 5% from $0.96-1.03 per lb on October 5.

While some traders expect further price weakness, their do not see steep losses given international prices, particularly in China and Brazil, key exporters to the US.

“I checked for some quotes on ferro-silicon exports from Brazil and my cost basis by the time it got to the US would be at current market prices, so that isn’t an option right now,” a supplier source said.

Another source said: “As Chinese prices are moving up, US traders are going to be running out of options to replace material…the downside [in US prices] should be pretty limited.”

Europe extends steady trend
The European ferro-silicon market has been steady in the past weeks, with suppliers holding their offer prices despite no deals being reported. 

Metal Bulletin assessed European ferro-silicon prices at €1,300-1,400 ($1,510-1,626) per tonne. There is something of an impasse in spot market trading between suppliers and consumers. 

Consumers are in no hurry to supplement their long-term intake of alloy and are interested only in the low end of the current spot price trading range, or even lower. However, suppliers are interested in doing business at the upper end of the price range and are holding firm in expectation of higher prices in the near term.

Suppliers reckon European availability is tight and that the market is being further supported by strengthening prices in China and South America. China and Brazil export much of their foreign sales to the US, while Brazilian exports also go to Europe.

Any increase in South American ferro-silicon exports to the US should tighten availability in Europe, according to European suppliers. Moreover, US importers sometimes look to Europe for supplies if Chinese and South American export prices increase steeply.

Europe typically consumes around 600,000 tpy of ferro-silicon, relying on 400,000 tonnes of domestic production and 200,000 tpy of imports.