GLOBAL FERRO-SILICON WRAP: Thin inventories bolster US prices; EU prices threatened by steelmaking cuts

The US ferro-silicon market continues to make up ground on global pricing, while European prices have taken a step back amid expectations of waning demand from end-users.

  • US prices continue to receive boost from supply constraints
  • Lagging US prices threaten to limit incoming inventory
  • EU prices slide amid demand concerns
  • Regional tightness in EU should provide pricing bottom
  • Chinese market maintains stability

Thin inventories boost US prices
US ferro-silicon prices rose again last week, supported by thin inventories amid high replacement costs.

Spot prices for ferro-silicon increased for a fourth consecutive week, reaching 80-82 cents per lb on May 18, up slightly on the low end from 79-82 cents per lb previously, according to Metal Bulletin sister publication AMM’s latest assessment.

Prices have now risen 5.2% since the start of this recent price run from 75-79 cents per lb on April 20.

While spot market demand continued to show some signs of life, suppliers have continued to lift prices with current inventories running thin.

“There is tight supply in the USA coupled with high waters, which is pushing the price up,” a supplier source told AMM, alluding to the widespread shipment delays in the Midwest resulting from adverse barge shipping conditions.

“I booked business with a mill, which then asked me several more times for more material, but I am now out of spot market [material] until July,” a second supplier source told AMM.

US inventories have run thin – prices there have lagged behind the global market, which has made the USA an unattractive export destination.

“The low prices that dragged down the market about two months ago stopped traders and other suppliers from coming here,” a third supplier source said to AMM.

Strong European pricing over that time in particular has caused suppliers to divert material to Europe to capitalise on the superior pricing environment, while also taking on less risk.

“The European price was much better for Malaysia and Kazakhstan with [lower] freight costs too,” the third supplier source said.

Malaysia and Kazakhstan had previously been the primary concerns for excess material imports among market participants, given their recently bolstered positions in the US market this year.

While most sources for imports to the UAS have been priced out of the market, market participants indicated that a recently downturn in the Brazilian Real may open up the supply line again.

“The weakened currency would have to set in for months before traders start to take advantage of the currency, so we are a long way away from that having any major effect on the market if it lasts,” a fourth supplier source said.

Market participants therefore suspect that pricing may continue to show strength heading into the forthcoming third-quarter negotiations.

EU prices under pressure amid expected steelmaking cuts
In Europe, the spot ferro-silicon market moved lower because suppliers succumbed to lower offers. Prices were also rebounding while suppliers resisted lower recent bid prices from consumers.

Metal Bulletin’s price quotation for ferro-silicon delivered in Europe dropped to €1,270-1,320 ($1,387-1,442) per tonne on Friday from €1,280-1,350 per tonne previously.

Market participants expect downward pressures to increase in the coming weeks while European steelmakers cut their production rates.

European steelmakers have signalled they are cutting production by 5-10% next month for third-quarter smelting schedules, they said, resulting in an operating rate at around 80-85% of their respective capacities.

“There is also market expectation of more imports from Malaysia,” one trader said, adding that Australia-listed ferro-alloys producer OM Holdings is looking to sell more ferro-silicon to the trade in Europe instead of end-users.

OM Holdings reported record high sales of ferro-silicon from its Sarawak plant in Malaysia in the first quarter of this year.

But relatively low ferro-silicon availability in Europe should offer some domestic price support in the coming months against a further potential drag on prices amid the seasonal slowdown in July and August.

European producer OFZ Slovakia told Metal Bulletin this week it has delayed switching one of its ferro-silicon production furnaces to silicon production until the last quarter of this year. The company supplies customers in Europe.

Moreover, European imports from Brazil, where producers have cut production in line with a fall in hydro-generated power supplies, should cement price support.

Chinese market stable
The Chinese ferro-silicon spot market was stable, with prices holding in the same range of the previous week.

Metal Bulletin’s ferro-silicon price in the Chinese spot market was 5,400-5,600 yuan ($782-811) per tonne in-warehouse on Friday May 19 while the fob price was $1,130-1,150 per tonne, both unchanged from a week ago.

“The market is stable to firm, I feel. The overall sales performance is normal this week,” one major producer in China said.

Trading limited in the export market was limited, however, while exporters stand firm on their offers in the hope of further price increase in the near term.

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