Ferroalloy: The price of ferro silicon breaks 10,000 again, but it is not sustainable
Jun 13, 2022
The price of ferro silicon futures has once again exceeded 10,000 yuan/ton, but considering the decline in domestic and foreign demand and the high output of the supply side in the future, it is difficult for the price to remain above 10,000 yuan/ton for a long time. In the medium and long term, production companies can choose to sell at high levels to hedge their profits and lock in production profits in advance. In the short term, the black market sentiment is still in an optimistic cycle, and the price of ferrosilicon may still be on the left side. After the price of the disk shows a clear signal of stagnation, you can try to place an empty order.
Strategy:
Manufacturers can sell hedges at high levels to lock in production profits in advance; individual customers can try to place empty orders after the market price shows obvious signs of stagnation.
Risk warning:
Shortage of electricity in summer, sharp reduction of silicon manganese production
The decline in overseas demand will obviously affect the export of ferro silicon.
Excluding China, overseas crude steel production has entered negative growth year-on-year. Overseas crude steel output in April was less than 70 million tons, down more than 6 million tons or 8.7% from the current high, and down 3.5 million tons or 4.9% year-on-year. Since the beginning of this year, the World Bank has successively lowered its global economic growth forecast for 2022. In January this year, it once gave a growth forecast of 4.1%, while the latest forecast is only 2.9%. The pressure of the global economic downturn is huge. The growth in demand for steel is limited, and it is expected that overseas crude steel output may continue to fluctuate and decline in the future. In turn, it indirectly drags down the export of domestic ferro silicon.
Moreover, the export price of ferro silicon has dropped sharply recently. The latest data shows that the export price of ferro silicon 72% FeSi in Tianjin Port is 1825 US dollars / ton, which is a sharp drop of 400 US dollars / ton compared with the highest price since the Russian-Ukrainian conflict of 2225 US dollars / ton, and has basically returned to the level before the Russian-Ukrainian conflict. According to the current market price to estimate the export profit, each ton of ferro silicon exported will bring a loss of 100-200 yuan/ton to traders. At this stage, the export of ferro silicon is facing a certain pressure, and the export volume is at risk of a sharp decline. In April, the export volume of ferro silicon was close to 78,000 tons. Referring to the situation when exports were in losses in August-September 2021 and February 2022, the export volume of ferro silicon in the future may decrease by 25,000-50,000 tons compared with April.
To sum up, compared with April, the domestic demand for ferro silicon dropped by 27,000-38,500 tons in a single month from July to September, and the external demand decreased by 25,000-50,000 tons, and the total domestic and foreign demand decreased by 52-88,500 tons. It accounts for more than 10% of the current total demand, and the huge downside space on the demand side has led to pressure on prices.
