Ferro silicon prices had bottomed out in Nov’21 but since has seen a streak of consolidation for nearly three months. During this period, there was no obvious change in the trade dynamics and the price of ferro silicon lacked short-term directional guidance.
However, in the near future, a new round of replenishment by downstream steel mills is about to start, which will usher in a phased improvement in ferro silicon prices.
Production to gradually decline
In 2022, the constraints of energy consumption for ferro silicon production will be relaxed. Under the condition of good profits, many large submerged arc furnaces in Ningxia and Shaanxi in China have been fired, and ferro silicon production has continued to rise.
However, in principle, no new ferro alloy production capacity projects will be added, and those that are really necessary to be constructed should follow the principle of ‘reduction and substitution’.
Moreover, the capacity replacement is after all at a 1.25 : 1 reduction/ replacement ratio, and the output of the main production areas will still show a gradual decline in the future.
It has been established that ferro silicon production will be limited, which will support prices at a high level.
Inventory replenishment
After steel production curbs were lifted, the steel mills mainly consumed in-plant inventories of alloys, which eventually led to low inventory level with mills.
The peak production season for steel mills is approaching, and there is a new round of replenishment demand for ferro silicon. At present, a new round of bidding for steel mills in East China has been launched, and the price is set at RMB 9,100-9,200/tonne ($1,440-1,456/t).
The current round of bidding for major manufacturers in the North has not yet started, but considering that the current profit level of steel mills is relatively good, and the current total inventory of ferro silicon being relatively low, it is expected that the spot price of ferro silicon will receive a certain boost.
Leave a Reply