Is Ferro Silicon the Next Graphite Electrode?

Ferro Silicon prices have witnessed a sharp rise by INR 10,000/MT on W-o-W basis in the Indian domestic market as most of the producers are low on inventory. Ferro Silicon producers from India and Bhutan are enjoying robust demand in line with the huge global supply shortage, which has prompted the producers to increase offers from USD 1400/MT FOB Kolkata to USD 1700/MT in a week. The prime reason for the shortage can be ascertained to Chinese production and supplies. The pollution controlling bodies in China have been cutting power supply to bring down the commodity’s production during the winter season. Ferro Silicon buyers have no option but to accept the skyrocketing Ferro Silicon offers as the market is witnessing a severe supply crunch.

The graphite electrode spot market soared above USD 40,000/MT, way above the contractual prices typically paid for 2017 accords — sources have estimated these were roughly around USD 4,000-7,000/MT. For steelmaking, via the Electric Arc Furnace route, there is no substitute for graphite electrodes. However, steel manufacturers have the likely option to switch to Manganese Alloys to replace Ferro Silicon, amid sky-rocketing prices and supply shortages.

The balance of power between buyers and sellers appears to have shifted in the Ferro Silicon market, as there is a severe shortage of the commodity in the global market, following output cuts in China.

There is an upsurge in overseas demand for Bhutanese produced Ferro Silicon in line with production cuts in China and Malaysian producers not having enough quantity for spot offers, and limited Russian supplies during winter. A source at one of the major Ferro Silicon producers in Bhutan revealed that they have concluded deals with German, Italian and Japanese companies in the last 10 days, in the range of USD 1400-1700/MT FOB Kolkata. In line with the increased prices in Bhutan, Indian producers have also been able to hike their offers. The current price of Ferro Silicon (70-75) is INR 95,000 /MT in Guwahati and in Bhutan. SteelMint learned from market sources that few producers have also started quoting at INR 100,000/MT and higher.

Ferro Silicon prices have reached its highest since 2008, and it is possible that few Manganese Alloy and Ferro Chrome producers shift to producing Ferro Silicon instead, on the back of very record high prices.