China: Ferro silicon output in Nov'24 nears 2-year high, production interest stays strong

• Higher profits, falling costs drive rise in output
  
  
• Oversupply may emerge amid waning demand
  
  

Mysteel Global: China's ferrosilicon (FeSi) output during November reached the highest monthly volume since January 2023 and is expected to remain elevated this month, as production costs are expected to stay low, industry insiders informed Mysteel Global.

Mysteel's tracking of 136 independent smelters in China shows that FeSi production in November rose 1.33% m-o-m to 510,400 tonnes (t). These smelters account for 90% of China's FeSi production capacity.

A notable contribution to the production growth came from Northwest China's Ningxia, a key region for FeSi production in China, where output surged to 122,400 t, higher by 5.7% from October.

The uptick in Ningxia relates to the significant production cuts that smelters there made in August due to pollution-related restrictions, Mysteel Global noted. After undergoing the necessary adjustments, the makers ramped up production in September-November to recover the shortfall.

However, while production rates in Ningxia continued to rise in November, the pace of growth slowed compared to the previous two months, given the continued operational losses during the previous month.

Meanwhile, in Inner Mongolia- China's largest FeSi production hub in the north- production in November increased by 1.7% m-o-m to 163,200 t. This was largely attributed to lower production costs, which supported smelter margins, with Mysteel data showing that electricity charges for ferro alloy smelting dropped to RMB 0.415/kWh ($0.06/kWh) as of 1 December, lower by RMB 0.01/kWh m-o-m.

Smelters in Ningxia and Inner Mongolia are expected to continue lifting their production this month, cashing in on improved profit margins as production costs are seen declining further, sources noted.

As of 10 December, Mysteel reported that the price of small granularity semi-coke in Shaanxi province's Shenmu county had decreased by RMB 40/t m-o-m to RMB 860/t. Semi-coke is commonly used as a substitute for metallurgical coke in FeSi smelting.

FeSi smelters in Ningxia, in particular, have seen a dramatic improvement in their margins, with their average profit per t of FeSi sold on 10 December at RMB 137.5/t, compared to a loss of RMB 70.5/t a month earlier, according to Mysteel's survey.

However, some market watchers have raised concerns about a potential oversupply in the FeSi market, as domestic smelters continue to ramp up production. With the loosening of supply, there are concerns that downstream demand may not keep pace, which could weigh on the spot prices of the ferro alloy, they warned.

In fact, signs of waning demand had already appeared in November. Mysteel's weekly survey of 247 Chinese blast furnace steel mills indicated that daily hot metal production declined slightly over the past month, averaging 2.326 million tonnes (mnt) on 6 December compared to 2.34 mnt on 8 November.

In parallel, production of magnesium (Mg), another key downstream sector consuming FeSi, also saw a decline in November, with Mysteel's survey of 53 independent Mg producers revealing that ingot production had fallen by 2.8% from October to 79,460 t last month.

As a result, FeSi stockpiles at smelters have been accumulating. Mysteel's regular survey shows that FeSi stocks at the 60 independent smelters it monitors had increased by 5,210 t from 8 November to a nine-month high of 67,000 t by 6 December.

On a positive note, in its recently announced FeSi bidding plan for December, Hebei Iron and Steel Group (HBIS), a major steelmaker based in North China, said it was seeking 2,141 t this month, some 641 t more than it sought in November. This may indicate some demand for raw materials from steel mills and magnesium smelters ahead of winter, which could help mitigate the oversupply in the FeSi market, according to a Shanghai-based analyst.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.