How far can ferrosilicon develop in the context of energy conservation and carbon reduction?

1. Ferrosilicon Industry Chain and Cost Structure

Ferrosilicon's upstream raw materials primarily include coke (blue carbon) and silica, which consume a significant amount of electricity. Producing one ton of ferrosilicon requires 8,000 kWh of electricity, accounting for over 53% of the total cost. Ferrosilicon's main downstream players include magnesium metal plants, foundries, steel mills, and exports, with an annual consumption of approximately 5 million tons. Ferrosilicon production is concentrated in the five northwestern provinces, with Inner Mongolia and Gansu as the primary production areas. The Ordos Group in Inner Mongolia holds the largest share, exceeding 30%.

2. Policy Impact and Market Reaction

The national energy conservation and carbon reduction action plan aims to rationally control the scale of the semi-coke industry, curb the reckless launch of high-energy-consuming and high-emission projects, and eliminate electricity price discounts for high-energy-consuming industries. This may lead to rising electricity prices and increased costs for ferrosilicon. In 2021, due to the impact of energy conservation policies, the price of ferrosilicon in the industry rose to 17,000 yuan/ton. Current market interpretation of the policy may lead to similar price increase expectations.

3. Recent Market Performance and Price Trends

Ferrosilicon prices continued to decline in the first quarter of this year, falling below the cost line by the end of March and early April. They began to rebound in mid-April due to production cuts and are currently trading around 7,000-7,100 yuan/ton. Ferrosilicon profits have improved compared to the same period last year, having exited the loss-making zone in early April, with current profits per ton around 1,000 yuan. Ferrosilicon inventories are low, and spot supply is tight, leading to high spot prices.

4. Future Outlook and Risk Warnings

The future price trend of ferrosilicon will be primarily influenced by electricity prices, coal prices, and policies. While the market is optimistic about favorable policies, fundamental demand growth is limited, and investment risks should be considered. In the short term, ferrosilicon production may be limited by policy adjustments. However, in the long term, if profits remain high, some idle production capacity may resume production.

Export volumes are not expected to increase significantly. Due to the high 25% tariff, annual exports are likely to remain below 400,000 tons.

5. Other Related Information

Ferrosilicon accounts for a very small portion of crude steel costs, but a significant portion of magnesium metal costs. Therefore, demand for magnesium metal significantly impacts ferrosilicon prices. Leading companies such as Ordos have limited participation in the futures market, primarily supplying steel mills and physical trading. Provinces such as Ningxia have a higher participation rate in futures trading. The above points illustrate the market dynamics and potential future trends of the ferrosilicon industry in the context of energy-saving and carbon-reduction policies. Investors should monitor policy changes and their impact on costs and prices.

For more information, please contact us at info@kexingui.com