GLOBAL FERRO-SILICON WRAP: Supply disruptions continue to fuel Chinese prices; US, EU markets remain in summer lull

Chinese spot ferro-silicon prices continued their run higher in the week to August 11, as production disruptions amid environmental inspections in the country exacerbated supply constraints.

  • Chinese market continues price run due to supply constraints
  • EU market slides on weak demand
  • US prices stable amid inactivity
  • Gains eyed ahead in lagging US market due to supply void

Chinese production disruptions continue to fuel price run
Chinese spot ferro-silicon prices further moved up this week on supply constraints, which have been continuously tightened by production disruptions due to environmental inspections in certain areas in north-western China.
The Metal Bulletin-assessed spot price for ferro-silicon, basis 75% Si in-warehouse China, rose to 6,800-7,100 yuan ($1,024-1,066) per tonne on August 11, up from 6,500-6,700 yuan per tonne a week earlier.
Domestic spot prices remained on a strong upward trend, mainly driven by supply tightness which has persisted for several weeks amid production suspensions in north-western China.
Though some refineries have started to resume production, market participants pointed out that the supply constraints will not ease too much until mid-September when those refineries are able to fully resume to operational capacities.
“The problem is that we don’t have any stocks to sell,” a north-western producer said.
Traders, meanwhile, followed suit with a major ferro-silicon supplier in China who raised their quotation to around 7,000 yuan per tonne.
Meanwhile due to higher domestic quotations and appreciation of Chinese yuan, the export market also witnessed a jump in ferro-silicon export prices last week.
The Metal Bulletin Chinese ferro-silicon export price, basis 75% Si, rose to $1,400-1,450 on the same pricing day, up from $1,330-1,350 previously.
The exchange rate between the dollar and Chinese yuan stood at 6.68 at about 3pm on August 11, compared with 6.72 at approximately the same time a week earlier.
European market slides on weak demand
European spot ferro-silicon prices have slipped in the past week as a virtual lack of activity has prompted suppliers to cut their offer prices to encourage buying demand.
However, sources noted they do not expect much more spot activity until the end of August or early September as steelmakers return in full after the seasonal slowdown and look to replenish their raw materials for their fourth quarter production schedules.
Metal Bulletin’s price quotation for standard grade (Si 75%) ferro-silicon delivered in Europe was assessed at €1,150-1,200 ($1,351-1,409) per tonne, from €1,170-1,235 per tonne the previous week.
The European spot ferro-silicon market was at an annual low of €1,120-1,200 per tonne from late February until mid-March this year, and then peaked at €1,220-1,350 per tonne through most of April.
US market remains stable amid inactivity
The US ferro-silicon market maintained stability, as spot market demand remained lacklustre.
US spot prices for ferro-silicon, in warehouse Pittsburgh, held at 80-84 cents per lb on August 10, unchanged over the past week, according to Metal Bulletin sister publication AMM’s latest assessment.
“It’s been dead quiet over the last week. There hasn’t really been any major consumer activity to test the price,” a supplier source said to AMM.
Inactivity over the summer months has led to a lagging price level in the USA, with domestic prices falling short European and Chinese prices.
The lagging US prices have market participants expecting stronger prices ahead, as traders’ inventories have thinned out.
“The US price isn’t a major premium to the market like it usually is, and logistics are higher costs. No trader is taking the risk of taking a significant position here at this time,” a second supplier source told AMM.
US imports of ferro-silicon sunk to 71,371 tonnes over the first six months of the year, down 16.4% from 85,359 tonnes in the same year-ago comparison.
While US imports have been subdued through the first half of the year, market participants did not expect this to trend to reverse in the second half, creating a supply void in the USA.
“Ferro-silicon seems on the verge of a real boom. It seems like there’s a shortage of oceangoing material,” a third supplier source said.
The lack of material heading for the USA comes as no surprise given the depressed pricing in comparison to the global markets.
In particular, the rapidly rising Chinese prices may create a vacuum in the Asian markets to be filled by would-be US supply sources such as Malaysian and Russian producers.
“Malaysia is shipping to the Far East – not the USA – to take advantage of the vacuum left by the Chinese. That market is by far the best netback basis for Malaysia,” a fourth supplier source said.
Meanwhile other suppliers will continue to seek out the European market, which has been at a premium to the US market for some time.
“These countries such as Malaysia, Kazakhstan, Iceland, Brazil and Norway will take flight to the higher European market. Why would those units come to the USA when better markets elsewhere are available? There will be a bit of a void which will left prices here,” the fourth supplier source added.
While activity is too limited at this time, market participants expect the supply shortage will show as market activity returns with fourth quarter negotiations during the month of September.

See also:
GLOBAL SILICON WRAP: Chinese price leaps on tightened availability; European spot market remains lacklustre

Chris Kavanagh

christopher.kavanagh@fastmarkets.com

Susan Zou

susan.zou@metalbulletinasia.com

Declan Conway

declan.conway@fastmarkets.com

Published

Chris Kavanagh

Susan Zou

Declan Conway

August 15, 2017

10:10 GMT

New York, Galway, Shanghai