GLOBAL FERRO-SILICON WRAP: Chinese market falls in line with demand, prompting suppliers to slash offer prices; Europe bucks downtrend
Chinese ferro-silicon prices fell almost 18% last week as suppliers tried to book profits before further price falls following a strong rally during the first two months of the current quarter. Meanwhile, the European market managed to buck the global downtrend as prices ticked higher on renewed consumer demand.
- Chinese supplier offers drag down prices
- Chinese consumers await October settlements
- Europe climbs higher on consumer demand
- US spot market eases amid quarterly talks
Chinese prices slump
Chinese ferro-silicon prices last week recorded their steepest fall since beginning a downward trend on September 1. Suppliers have increasingly cut their offer prices as they attempt to lock in profits after ferro-silicon prices rallied close to 60% in July and August. Meanwhile, consumers in the steel sector took to the sidelines in the spot market, opting to wait for a clearer price direction from soon-to-be-made October settlements.
China’s domestic spot price for ferro-silicon basis 75% silicon fell to 6,200-6,500 yuan ($940-985) per tonne on Friday September 22 – down 17.5% from 7,400-8,000 yuan per tonne a week before.
Consumer reluctance to buy on a spot basis has pressured suppliers to cut their offer prices to balance their books.
“Market participants are in a panic [to sell] and [suppliers] want to check the cargoes [out] as soon as possible before they lose [out on sales], particularly those suppliers who had long positions,” a producer source said.
Nanjing Iron & Steel Group has set its ferro-silicon (72% Si) basis purchase price for October at 6,500 yuan per tonne on delivery, according to market participants. Consumers are also awaiting further market direction from Hebei Iron & Steel Group, which is likely to announce its October purchase price in the next few days.
In futures prices, the most-traded January ferro-silicon contract on Zhengzhou Commodity Exchange closed at 5,892 yuan per tonne on September 21, down 520 yuan from the week before.
Chinese ferro-silicon export prices have eased amid a lack of trade activity and limited buying interest. The export price basis 75% silicon was last assessed at $1,350-1,400 per tonne on September 22, from $1,400-1,500 per tonne a week earlier.
New consumer deals buoy European prices
New consumer deals for prompt delivery pushed up prices in Europe over the past week after a pause in trading the week before when traders suggested longer-term business may be heading lower in price.
A few deals totalling around 1,300 tonnes were reported to consumers both in northern and southern Europe for between €1,410-1,525 ($1,680-1,817) per tonne, from a level of €1,150-1,200 per tonne in mid-August. The market was at an annual low of €1,120-1,200 per tonne in March this year. The last time the European was above €1,500 per tonne was in January 2011 when the price spread was €1,450-1,510 per tonne.
Suppliers said there is a divergence in European prices, with the market at the lowest end in northern Europe where consumers are buying alloy at close to €1,400 per tonne. Consumer demand is much stronger in southern Europe, particularly the southwest, where most of the reported tonnages sold last week were settled at more than €1,500 per tonne.
Traders had reported hearing business for about 2,000 tonnes the week before done as low as €1,370 per tonne, although that was on call through the fourth quarter this year. Still, some suppliers doubt that renewed consumer demand can persist on a spot basis much longer, and with steelmakers seemingly satisfied with their ferro-silicon needs in the near term a price correction may happen soon, they said.
Europe typically consumes around 600,000 tpy of ferro-silicon, relying on 400,000 tonnes of domestic production and 200,000 tpy of imports.
US spot slips amid Q4 negotiations
The US ferro-silicon market pared gains in the past week, with prices easing as some fourth-quarter delivery negotiations saw lower offer prices as suppliers competed for business.
US spot prices for ferro-silicon slipped to 99-105 cents per lb on September 21, down 2 cents on the low end of the range from 101-105 cents per lb the week before, according to Metal Bulletin sister publication AMM’s latest assessment.
Most negotiations for fourth-quarter delivery settlements have yet to be concluded. Negotiations that have been concluded have seen one steel mill booking deliveries of ferro-silicon at the low end of the current spot range.
Still, market sentiments suggests that suppliers are optimistic that quarterly deals can be done at stronger prices because of current tight availability and limited replacement options. China is a key ferro-silicon exporter to the USA and Chinese prices have been dropping this month.
“We know that prices have softened in China, which has eased US market pressures, but it makes no sense to quote below $1 per lb for ferro-silicon deliveries in the fourth quarter,” a supplier source told AMM.
“If you shipped from China today at those lower prices you may probably get a cost of about $1.00 per lb ddp. Unless you want to do that for free I don’t see how you can offer below that mark,” he said, adding that any new bookings from China will not arrive until well into the fourth quarter.
“Regardless of the weaker Chinese pricing in the past couple of weeks, import prices from potential suppliers have been much too high for some time,” another source said. “The supply gap has already been created, which should continue to pressure prices [upward].”