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You are here: Home » News » Price change/quotation » Cost Support Is Strong, And Ferroalloy Prices Are Mainly Volatile

Cost Support Is Strong, And Ferroalloy Prices Are Mainly Volatile

Views: 164     Author: Site Editor     Publish Time: 2024-04-08      Origin: Site

Cost Support Is Strong, And Ferroalloy Prices Are Mainly Volatile


In the first quarter of 2024, ferroalloy prices will mainly fluctuate downward, but the decline will slow down. As of March 22, the weighted index of ferrosilicon futures fell by 3.15% to 6,515 yuan/ton, and the weighted index of manganese silicon futures fell by 2.84% to 6,202 yuan/ton.


From a fundamental point of view, as the profits of ferroalloy production continue to be low, the output of ferrosilicon and manganese silicon has gradually decreased. However, ferrosilicon tends to balance supply and demand, while manganese silicon supply is still in excess. At the same time, manganese ore accidents occur frequently. The author believes that ferroalloy prices are in a situation where there is cost support at the bottom and no help is needed at the top.


First, let’s look at the situation of ferrosilicon. The supply of ferrosilicon has decreased significantly, and the decline in demand has narrowed. The support below is strong, and supply and demand have improved slightly.


The cost of ferrosilicon is mainly the electricity price. Electricity prices in the main ferrosilicon producing areas have risen and fallen. As of March 22, the production profits of ferrosilicon in various producing areas across the country from low to high are -279 yuan/ton in Gansu, -219 yuan/ton in Shaanxi, and -56 yuan/ton in Ningxia , Qinghai 2 yuan/ton, Inner Mongolia 96.5 yuan/ton. In terms of output, Ningxia, Gansu, and Shaanxi account for nearly half of the country's ferrosilicon output. Electricity price has become the most important cost support for ferrosilicon. Due to the fall in coal prices in March, losses in some areas decreased, but overall profits remained sluggish. In early 2024, ferrosilicon output and operating rates both fell back.


Since it is more convenient to resume production of ferrosilicon, companies have adopted the strategy of increasing operating rates when prices are high and peaking production when prices are low. Ferrosilicon production decreased significantly after February, and there was a slight shortage of ferrosilicon supply starting in March. According to statistics from relevant agencies, in January, the ferrosilicon output of 136 ferrosilicon manufacturers across the country was 470,830 tons, a month-on-month decrease of 7.07%, and a year-on-year decrease of 8.35%; the average daily output was 15,188 tons, a month-on-month decrease of 10.06%. In February, the ferrosilicon output of 136 ferrosilicon manufacturers across the country was 424,494 tons, a month-on-month decrease of 9.84%, and a year-on-year decrease of 10.80%; the average daily output was 14,638 tons, a month-on-month decrease of 3.62%.


From the perspective of demand, steel demand for ferrosilicon has a certain degree of resilience, and the demand for magnesium metal and export demand have narrowed. Data show that China's magnesium ingot production in January was 64,000 tons, a decrease of 2.8% month-on-month and a year-on-year decrease of 22%; China's magnesium ingot production in February was 66,582 tons, a month-on-month decrease of 3% and a year-on-year decrease of 5%. Data from the National Bureau of Statistics show that from January to February, the country’s cumulative crude steel production was 167.96 million tons, a year-on-year increase of 1.6%; pig iron production was 140.73 million tons, a year-on-year decrease of 0.60%; steel production was 213.43 million tons, a year-on-year increase of 7.90% .


Looking forward to the second quarter of 2024, demand for ferrosilicon is expected to show a seasonal improvement. Domestic demand for ferrosilicon depends on the increase in crude steel production, but the situation of sluggish real estate investment dragging down steel production is not expected to be reversed soon, and it is expected that steel production will hardly increase significantly in 2024. The export demand for ferrosilicon depends on changes in international energy prices. With the seasonal decline in thermal coal prices, the market has expectations for a decline in energy prices. However, under the influence of the complex and ever-changing international situation, both supply and demand have increased, and the demand growth rate is faster than the supply growth rate. Overseas demand for thermal coal has also picked up. Although the overcapacity of ferrosilicon is serious, ferrosilicon production is no longer in excess, and the price of ferrosilicon has strong support below it.


Secondly, looking at the situation of manganese silicon, the manganese ore side provides strong cost support.


Manganese ore imports show signs of decreasing at the end of 2023 and early 2024. South Africa's United Manganese Industry (UMK) mine announced production cuts to protect prices. As the price of manganese ore falls, non-mainstream ores begin to leave the market, gradually tightening the supply and demand of manganese ore. Customs data shows that in February, my country's manganese ore imports were 2.3 million tons, a month-on-month decrease of 19% and a year-on-year decrease of 15.03%. From January to February, my country's cumulative import volume of manganese ore was 5,139,731 tons, basically the same as last year. Since March, affected by hurricanes, the manganese ore shipments of Australian miner South 32 Company (South32) have been blocked, which is expected to affect the supply of 600,000 tons of manganese ore.


Manganese silicon production is less profitable, and the supply and demand margins are improving. As the spot price of manganese silicon has fallen, profits from northern manganese silicon production have also fallen. According to statistics, as of March 22, the manganese silicon production profits in Guangxi, Guizhou, Inner Mongolia, and Ningxia were -785 yuan/ton, -616 yuan/ton, -116 yuan/ton, and -477 yuan/ton respectively. According to the author's calculations, manganese and silicon production enterprises in the south suffered very serious losses, while those in the north suffered slight losses. The production of manganese and silicon decreased rapidly, and the deceleration accelerated after March. According to statistics, from January to February, the cumulative manganese and silicon production of 187 manufacturers (99%) in silicomanganese production areas across the country was 1,774,446 tons, a year-on-year increase of 0.9%. As of March 22, the average daily manganese and silicon production dropped to 26,000 tons, nearly 10,000 tons lower than the previous high. However, the supply of manganese and silicon is still in excess, and only increased purchasing and stockpiling can alleviate the excess.


To sum up, it is expected that ferroalloy cost support will be strong in the second quarter, but there is still a lack of room for growth. It will be necessary to observe whether there are strengthening factors at the end of the second quarter.

Reprinted from: China Metallurgical News

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