India: Ferro silicon prices rebound sharply amid supply worries

Indian ferro silicon (70%) prices bounced back by INR 8,000/tonne (t) w-o-w. As per SteelMint's assessment on 16 June 2022, Guwahati producers' offers were at INR 133,000/t exw while Bhutan's hovered at around INR 134,000/t exw.

This was a sharp rebound considering that prices had been falling almost consistently for three months in tandem with the overall subdued demand for finished steel.

Why did prices show sudden rebound?

• Smelters may opt for maintenance shutdowns: There is a strong buzz in the market that major ferro silicon producers may opt for maintenance shutdowns which will lead to a supply squeeze. Although there was no confirmation on the news, traders and buyers scrambled to secure supplies.India's ferro silicon consumption amounts to around 250,000t/annum. Most of this volume is consumed by steel mills and stainless-steel manufacturers. That apart, some amount is used in foundries.
  
  
• Rains in north-east disrupt supply: The north eastern region of India has experienced very heavy rainfall, which has disrupted supplies. The north east, it may be noted is the largest ferro silicon producing zone in India, with a share of around 15,000 t per month while Guwahati is a major trading hub.
  
  
• Larger smelters heavily booked: Another factor adding to supply worries is that some of the major domestic ferro silicon smelters as well as those from Bhutan, the largest import destination, have been so far busy catering to bulk orders from major steel mills in India. With their order books full, they are in no position to fulfil demand from the smaller steel mills, stainless steel makers and foundries.
  
  

Why have stocks depleted?

• The rains and consequent supply disruptions have added to the panic of the buyers whose stocks have depleted and they need to procure.
  
  
• Price fall deterred buyers: Prior to this rebound, prices had been falling for almost three months, encouraging buyers to adopt a wait-and-watch stance, in expectation of further drops. Therefore, procurement did not happen in significant volumes.
  
  
• Subdued steel demand: Moreover, demand for finished steel being very subdued these past few months, ferro silicon buyers and traders had also not shown too much interest in purchasing or even in imports. Sources said price, at present, is not a factor and buyers need to secure supplies at any cost. Ferro silicon is quite an indispensable input material in steel or stainless-steel manufacturing since it cannot be substituted with any other alloy.
  
  

Outlook
Smelters are not under pressure. While the larger ones are well-booked, traditionally the monsoon sees smelters opting for maintenance shutdowns. This can limit supplies and lead to a surge in prices of ferro silicon in the short term.

If domestic supply reduces significantly, then buyers and traders may have to turn towards imports to fill in the need gaps.