China's ferro silicon output hits half-year high in Jun'24

China's ferro silicon (FeSi) market saw a further increase in supply in June, reaching a new high for the first half of 2024, according to Mysteel's latest data. Market insiders noted that supply may edge up further this month, given the high production enthusiasm among domestic ferro silicon smelters. However, the price of the ferroalloy may come under pressure, they suggest.

In June, ferro silicon production among the 136 Chinese smelters surveyed by Mysteel increased by 33,998 tonnes, or 4.6% month-on-month, to reach 482,196 tonnes. These smelters account for 95% of the country's total ferro silicon output.

Among China's five major ferro silicon production bases - namely Inner Mongolia, Qinghai, Ningxia, Shaanxi, and Gansu, Gansu province in Northwest China posted the sharpest month-on-month increase in production, with output there surging by 41.27% to 35,300 tonnes, according to Mysteel's data.

The primary driver of the increased production was the declining cost of semi-coke, a substitute for metallurgical coke in ferro silicon smelting. Mysteel's assessment of the price of semi-coke of small granularity in Shenmu, in Northwest China's Shaanxi, was lower by Yuan 80/tonne ($11/t) month-on-month at Yuan 870/t as of July 8. This might weaken support for ferro silicon prices on the cost front, market sources warned.

In addition, the higher-than-expected tender price for ferro silicon announced by Hebei Iron & Steel Group (HBIS Group) for June delivery had buoyed sentiment among domestic smelters, prompting them to raise production with the tender prices being lucrative, Mysteel Global observed.

However, the bidding market may cool this month, sources warn. On July 3, HBIS announced that it was seeking 2,629 tonnes of ferro silicon products for July and nominated an intentional price of Yuan 7,000/t, much lower than June's tender price of Yuan 7,550/t. As of July 8, no deal had been concluded at this price, Mysteel Global noted.

The aggressive reduction in HBIS's bidding price for the ferroalloy was attributed to the lower profitability of Chinese steelmakers, given that finished steel prices are weakening, market sources pointed out.

Mysteel's survey indicates that the profit ratio among the 247 blast furnace mills nationwide under its regular tracking had slipped to 44.59%, a notable 11.22 percentage points plunge from June 7.

With fewer steel mills enjoying profits from steelmaking, fewer would procure high-priced raw materials, including ferro silicon, this month, a market watcher argued. This, together with the weakening prices of semi-coke, is likely to weigh on the prices of the ferro alloy in July, she warned

However, pricing concerns have clearly not dampened the enthusiasm for production of domestic ferro silicon smelters, as most remain optimistic about demand from steel mills this month, especially after HBIS's bidding volume of 2,629 tonnes was higher compared to the 2,200 tonnes it sought in June.

Despite the abundant supply last month, happily for Chinese smelters ferro silicon inventories remain low for the year, despite a slight month-on-month increase. Mysteel's latest survey among 60 independent ferro silicon smelters showed that their stocks climbed by 4.5% from June 7 to reach 51,730 tonnes by July 5. These smelters account for about 80% of the country's total ferro silicon smelting capacity.

The still-comparatively level levels of inventory were mainly attributed to robust demand in June from domestic steel mills, Mysteel Global noted. Crude steel output among member mills of the China Iron and Steel Association (CISA) totaled 8,658 tonnes in June, staying largely stable from May's 8,663 tonnes, according to Mysteel Global's calculations based on CISA's latest data.

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