The current operating rate of ferrosilicon is historically low, the flexibility to increase production in the later period is relatively large, and the supply side has little restraint on prices. From the perspective of demand, terminal demand is expected to continue to rise quarter-on-quarter under the influence of seasonality in the short term. However, considering the recovery strength of real estate and manufacturing, it is expected that terminal demand will continue to rebound sharply. Therefore, we need to be alert to the risk of weakening steel supply and demand again. At present, short-term ferroalloy prices are still running weakly. Later, with the restoration of steel mill profits, prices may stabilize and rise, but from the perspective of Ferroalloy’s own supply and demand, prices continue to rise It is unlikely that the overall trend will remain stable and weak.
1. Market review of the first quarter
(1) Review of the spot market
The spot price of ferrosilicon fluctuated and went down in the first quarter. Before the festival, the market was optimistic about the downstream demand, and the price was running at a high level. After the festival, the price of ferroalloy maintained a fluctuating downward trend. The profits of steel mills were at a low level. Inventory is the mainstay, and rigid procurement of ferroalloys is maintained. The prices of mainstream ferrosilicon steels all dropped month-on-month, and the market sentiment of ferroalloys was slightly sluggish. As of March 31, the absolute price index of ferrosilicon fell by 5.4% to 7636 in the first quarter. Compared with the fourth quarter of last year, the center of gravity of ferroalloy spot prices in the first quarter of this year still moved down, which is in line with seasonal characteristics.
(2) Futures Market Review
In terms of futures, the main contract prices of ferrosilicon fluctuated and declined in the first quarter, and the decline of futures prices was significantly greater than that of spot goods in the same period. The main contract of ferrosilicon fell by 7.45% to 7854. The average daily trading volume of ferrosilicon fell by 10% month-on-month to 264,950 lots. In terms of positions, the number of ferrosilicon positions at the end of the first quarter increased significantly compared with the fourth quarter of last year. As of March 31, the number of ferrosilicon positions was 439,581, an increase of 11% quarter-on-quarter. On the whole, the Ferroalloy futures market increased its position in the first quarter and fell.
2. Import and export of ferrosilicon
In the first quarter, the export of ferrosilicon continued to weaken in the second half of last year. From January to February, the export of ferrosilicon dropped significantly. In January 2023, the total export of ferrosilicon was 55,661.409 tons, a decrease of 15,309.40 tons compared with the same period last year, a year-on-year decrease of 21.57%. In February 2023, the total export volume of ferrosilicon was 24381.96 tons, a decrease of 20737.38 tons compared with the same period last year, a year-on-year decrease of 45.96%, and a month-on-month decrease of 56.2%. From January to February, the cumulative export was 80,043.37 tons, a year-on-year decrease of 26.8%. In January, the export volume to Indonesia increased sharply, while the export volume to Japan and Korea decreased slightly. In February, the export volume to Indonesia dropped back to the normal level, while the export volume to Japan and South Korea continued to drop slightly. Overseas demand is weak, and ferrosilicon export is expected to hardly increase significantly.
3. Ferrosilicon at the cost side – coke semi-coke and electricity price
In the first quarter, the prices of coke and semicoke both weakened from the previous quarter. The profit of steel mills is meager, and the acceptance of the price of the furnace charge is not strong. The price of coke has stabilized and dropped slightly, with a drop of about 150 yuan/ton in the first quarter. From January to February, the price of small semi-coke materials continued to weaken. In March, the losses of semi-coke companies increased. Many local semi-coke industry associations proposed to limit production and guarantee prices and issued the lowest guiding price. The number of enterprises reduced and stopped production increased, and prices stabilized and rebounded. In the first quarter, semi-coke fell by about 200 yuan/ton. In the later stage, the supply and demand of Coke are loose, and the price is expected to remain weak. The operating rate of semi-coke enterprises is at a low level, the supply side is relatively flexible, and the price is expected to remain stable. Overall, the drive of the Ferroalloy cost side to the price in the second quarter is not obvious.
As an important proportion of the production cost of ferroalloy, the price of electricity was clearly differentiated between the north and the south in the first quarter. The cost of electricity for ferroalloys in the main producing area of Inner Mongolia dropped from 0.47 yuan/kWh at the beginning of the year to 0.44 yuan/kWh at the end of the first quarter. Compared with the 0.49 yuan/degree in the fourth quarter of last year, it has dropped. The cost of electricity for ferroalloys in Guangxi’s main production areas rose from 0.58 yuan/kWh at the beginning of the year to 0.65 yuan/kWh at the end of the first quarter, mainly due to the rise in hydropower prices. The differentiation of electricity prices in the main production areas has led to an expansion of the difference in production costs of ferroalloys between the north and the south. In the later period, as the Fengshui period approaches, there is room for electricity prices in the south to decline.
4. Demand side
From January to February, China’s crude steel output was 168.696 million tons, an increase of 5.6% year-on-year. The actual demand for ferroalloys in the first quarter was on the rise from the previous quarter. After February, the terminal demand has improved significantly, the demand for finished products has continued to rise, the output of the five major steel types has continued to increase, and the demand for ferrosilicon has gradually increased. Affected by low profits in February, steel mills were not willing to take the initiative to restock ferroalloys. Steel intake was at a historically low level in the same period. Steel mills maintained a low inventory strategy. Starting in March, with the improvement of downstream demand, the operating rate of steel mills increased. In the peak season, the steel intake of mainstream major manufacturers began to increase, but compared with the same period last year, the intake of ferrosilicon steel in April was at the historical median level.
Anyang Lishi Industrial Co., Ltd. can provide high-quality ferrosilicon 72-75% grade, especially with advanced technical support for the requirements of low aluminum and low carbon ferrosilicon. Follow us to learn more about the market conditions of ferroalloys.