Weak demand to weigh on China's ferro silicon market in 2025

Mysteel Global: China's ferro silicon (FeSi) market was dragged down by subdued demand from end-users throughout 2024, and market watchers remain cautious about demand growth in 2025, anticipating lower consumption of Chinese FeSi in both domestic and overseas markets.

The shrinking of demand for the ferro alloy was most evident in the domestic carbon steel market last year. According to Mysteel's survey, approximately 1.04 million tonnes of FeSi products were consumed in steelmaking last year, plunging by 12.6% compared with 2023 and marking the fifth consecutive yearly decrease in consumption. Companies in the surveyed sample accounted for 70% of China's steel production capacity.

Market analysts anticipate that FeSi demand from the steel sector this year will remain low, as crude steel output from blast furnaces shows little potential for significant growth, given the continuing decline in steel demand, particularly from the real estate and infrastructure sectors.

China's steelmakers have also faced profitability challenges over the past year, leading many to offer progressively lower bidding prices for raw materials, including FeSi. For instance, over the past twelve months the bidding price of 75% FeSi announced by Hebei Iron and Steel Group, a leading Chinese steelmaker, averaged Yuan 6,843/tonne ($937.2/t), tumbling 11% compared with the average of Yuan 7,687/t during January-December 2023.

Another major consumer of FeSi, the magnesium (Mg) sector, is facing similar challenges, with Mysteel assessing the spot price of 99% Mg ingot in Northwest China's Shaanxi on December 31 at Yuan 15,975/t, plunging by 21.5% from a year earlier.

With losses mounting among domestic Mg manufacturers due to the continuous decline in Mg ingot prices, many have postponed the start of new production lines set for 2025 to a later date. This will inevitably hinder FeSi demand this year, with a Mysteel report on the commodity estimating full-year FeSi consumption in Mg production at around 950,000 tonnes, down from approximately 1.13 million tonnes in 2024.

Additionally, the export prospects for FeSi remain subdued this year, as the steep decline in the price of Russian ferrosilicon stockpiled in bonded warehouses has led to a reduction in both export orders and profit margins for China's FeSi traders.

According to data from the General Administration of Customs of China, the country's total FeSi export volume reached 391,700 tonnes during the first eleven months of 2024. Mysteel's annual report estimates that the total export volume for 2024 will be around 420,000 tonnes, with a decline to approximately 400,000 tonnes projected for 2025 as tense global trade dynamics and high ocean freight rates are likely to persist.

The declining demand for ferrosilicon in the production of carbon steel is an inevitable result of the global shift toward electric-arc furnace steelmaking where less of the ferroalloy is required compared with the traditional blast furnace-converter route, as ferrous scrap already contains FeSi. However, the growing demand for more specialized steel grades, such as silicon steel and alloy steel, is expected to offer a glimmer of hope for FeSi demand from the steel sector in the future, according to a market insider.

Particularly, the stainless steel sector is likely to show some growing demand for FeSi in 2025. Mysteel's annual report estimates that China's crude stainless steel output will edge higher by 3% this year from last year's 38 million tonnes. The production of one tonne of stainless steel requires 6-10 kilograms of FeSi, depending on the specific stainless steel grade, Mysteel Global notes.

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