What do ferro alloys production cuts in China mean for India?

The Indian ferro alloys industry has witnessed a sudden optimism since the past week, after Chinese futures started soaring on reduced output in the country. Although, this can impact some ferro alloys in the Indian market, others will be driven by optimistic sentiments.

In addition to the power curtailment in the various provinces in China, the country is about to go into a week-long holiday from 1-Oct, due to which stocking up on the material is higher. Meanwhile, the country might witness further coal shortage as the winter approaches, as it would require more coal for household purposes. It is expected that the ferro alloys output is to be cut down by around 35-50% this month in major producing areas owing to power curtailment.

China accounts for around 68% of the global silico manganese production and 40% of the global ferro manganese production. In 2020, production of silico manganese and ferro manganese stood at 11.78 mn t and 1.92 mn t respectively. Meanwhile, the country is also the largest producer and importer of ferro chrome, with 5.66 mn t in production and 3.07 mnt of imports in 2020. In 2020, the country produced around 5.3 mn t of ferro silicon.

Ferro chrome
China is the biggest importer from India with 50% of the total Indian ferro chrome export volume. In the past few months, the Chinese ferro chrome companies, especially in the northern region, are facing severe production cuts leading to material shortage in the domestic market. Recently, a major ferro chrome producer in Inner Mongolia went out of material and had to inquire for ferro chrome from its other counterparts to meet the contracts. The current prices in the Chinese market are at around RMB 11,400/t, which is a record high. This has also supported the increase in prices in both Chinese and Indian market as the inquiries from China picked up.

However, the market scenario is a bit puzzling, as stainless-steel mills in China are not confident about bridging the gap with imports at such high prices. The companies are mostly dependent on the policy of the province and remain unsure whether they would be allowed to continue production in the coming weeks. Many stainless steel mills are facing production cuts and are shutting down as well, which is making them uncertain about the inventory planning and importing the material.

Ferro silicon
In recent weeks, ferro silicon prices have witnessed a phenomenal rise of INR 29,000/t w-o-w, while some producers have also increased their offers to around INR 170,000/t ($2,303/t). The whole market is being governed by the increased prices in the Chinese market. The country is one of the major exporters to India, after Bhutan, catering to 16% of the total imports. Meanwhile, Bhutan has limited material to supply in the spot market. Thus, with increased imported material prices, the major two regions of Bhutan and Guwahati are trying to match the prices of China. Current export offers from China are at around $3,700/t FOB China. The overall market situation is very bullish for the ferro silicon industry as China is getting short of material and the Indian market is solely dependent on domestic supplies.

Manganese alloys
Chinese spot market prices soared this Friday by around RMB 800/t ($124/t) d-o-d, on severe production cuts faced in major manganese alloys producing provinces in China. Although the country is not an active exporter the significant spike in the prices has impacted the Indian market. Most of the Indian smelters are anticipating that the international prices will spike soon on increase in the 65-17 prices in the Chinese market. Exporters reported that there are increased inquiries from the Japanese and Taiwanese companies for the material after the price rise in China.