GLOBAL FERRO-SILICON WRAP: Europe consolidates gains, eyes Q2

The European spot ferro-silicon market consolidated its recent bull run in the past week ended Friday April 7, with prices narrowing on the low end of their present trading range against limited availability and steady demand.

  • Europe cements price increases
  • Limited spot availability, low imports
  • …but consumers have enough nearby stocks
  • China stable, watching brief in market near term
  • US dips, but recovery expected

The European spot market is at a level last seen nearly six years ago, according to Metal Bulletin data, and was reported at €1,220-1,350 ($1,290-1,428) per tonne. The European spot price range was €1,310-1,450 per tonne in May 2011 (a year when it peaked at €1,450-1,510 per tonne in January), according to Metal Bulletin data.

Ferro-silicon consumers and suppliers diverged on where they did business over the week, with consumers reporting deals around the lower end of the current range, while suppliers reported doing deals in the top half.

One industry source who buys and sells ferro-silicon reported a purchase of 100 tonnes of standard grade ferro-silicon (1.5% Al, 0.10% C) for delivery around late May at €1,225 per tonne.

Another major supplier reported business at €1,250 per tonne delivered for 500 tonnes, with virtually nothing to spare for the spot market in the near term, while another supplier is offering standard grade ferro-silicon at €1,270 per tonne on a spot basis.

All dealers saw only low levels of imports, mostly being offered from India, while there is nothing available below €1,220 per tonne delivered on a spot basis.
One major buyer in Europe said he saw no business above €1,300 per tonne and added that he is looking to settle longer-term monthly and quarterly settlements in the next few days. There are ample ferro-silicon stocks in consumer yards, and he said he expects little spot demand from them in the near term.

However, another major supplier said they are offering standard grade ferro-silicon at €1,340 per tonne delivered after “passing the €1,300 per tonne level in the past week”.

Indian exporters are offering ferro-silicon to Europe at about €1,200 per tonne cif ($1,150-1,180/tonne cif plus freight and handling costs), and have been successful in getting business. Exporters in Bhutan are also offering alloy at slightly higher price levels. Indian ferro-silicon is only 60% silicon content: the country does not produce the standard 75% silicon grade ferro-silicon that is typically traded in Europe, though some consumers in Europe can use it. Bhutan can produce 72-74% silicon content alloy.

China stable as April tenders increase
The Chinese ferro-silicon spot price was assessed stable at 5,700-6,000 yuan ($826-869) per tonne over the week, unchanged from the week before. The domestic trend influenced Chinese export business, which traded at $1,200-1,230 per tonne fob China, also unchanged from the week before.

Some Chinese mills have increased their April tender price by about 1,000 yuan to about 6,000-6,100 yuan per tonne, including delivery and payment through an acceptance draft after tracking an earlier increase in spot price levels.

“Smelters are holding at low operating rates and so can support current price levels,” a trader in Beijing said. “I think prices are likely to hold at the current level through April, with the market watching production levels as some smelters have plans to restart [idled] production [given stronger prices in recent weeks],” a producer source in China said.

US market slips, but bounce expected
The US ferro-silicon spot market slipped to 75-79 cents per lb on April 7, down 1.3% from 76-80 cents, according to Metal Bulletin sister publication AMM. Spot market activity slowed last week as the majority of steel mills have completed their ferro-silicon intake needs for second-quarter business. The virtual lack of spot market demand from steel mills has prompted more aggressive offer prices from ferro-silicon traders and suppliers to secure deals.

“Ferro-silicon is a strange animal right now because if you look at what is going on in Europe and Asia we should be well above 80 cents – but we aren’t,” a supplier source told AMM. Ferro-silicon suppliers in the USA are frustrated with the weaker price trend because of strengthening replacement costs from overseas suppliers.

“The crazy part is that the US price is the lowest price pound for pound in the world outside of Chinese domestic pricing,” a second supplier source said to AMM, adding that he thought the current market situation in US prices could not last much longer.

Although steelmaker demand has been limited, dealers have noted an increase in inter-merchant interest in the ferro-silicon market, which suggests that current US ferro-silicon inventories may be at a low level.

“We are hearing all these cheaper numbers out there [in the spot market] but then we are seeing traders and suppliers out looking for more material,” a third supplier source said

A fourth supplier source believes this is because either there is a shortage in supply or some traders have shorted the market. He added that he expected a market bounce in due course.

Given stronger replacement costs from overseas, US dealers reckon domestic spot prices will recover in the near term.

“We are going to pull back from the spot market,” the second supplier source said. “A lot of the second quarter is already booked and we think prices are going to look a lot higher than they do right now.”