China's April ferro silicon output hits 2.5-year low

China's ferro silicon (FeSi) market saw a new low in supply in April, while an optimistic sentiment started to pervade the market by the end of last month, seeing its prices tick up after a six-month decline, Mysteel Global observed. In April, ferro silicon production among the 136 Chinese smelters under Mysteel's monthly survey dropped by 41,507 tonnes (t) or 9.7% on month to touch a two-and-half-year low of 384,458 t. The surveyed smelters' output accounts for 95% of the country's total.

Among China's five major ferro silicon production bases (Inner Mongolia, Qinghai, Ningxia, Shaanxi, Gansu), Northwest China's Shaanxi province posted the sharpest on-month fall of 31.36% in its ferro silicon output to 55,000 t, according to Mysteel's data.

On one hand, the rising prices of raw materials for ferro silicon production last month squeezed smelters' profit margins, prompting them to scale down production of the ferroalloy.

For instance, Mysteel's assessment of the price of semi-coke of small granularity in Shenmu in Shaanxi was higher by a marked yuan 120/t ($16.6) on month at yuan 850/t as of 30 April. The rising costs left ferro silicon smelters in Shaanxi in losses, with their average loss reaching yuan 20/t in April, according to Mysteel's survey.

On the other hand, top steelmakers in China offered lower bidding prices for ferro silicon in the first half of April, dampening production enthusiasm among ferro silicon smelters to some extent, Mysteel Global learned.

For example, on 12 April, 2024, Hebei Iron & Steel Group (HBIS Group) finalised its ferro silicon bidding price for April delivery at yuan 6,600/t ($914.1/t), down yuan 150/t on month, while the bidding volume was down 124 t on month to 1,640 t. Though at the end of last month, some steelmakers in southern China lifted their ferro silicon bidding prices after seeing a rebound in the domestic steel market.

The output reduction led ferro silicon inventories at smelters to decline as well in the past month. Mysteel's weekly survey among the 60 independent ferro silicon smelters showed that their stocks of the ferroalloy moved down by 11,590 t from 29 March to reach 59,590 t by 26 April, nearing a 14-month low. The surveyed smelters host about 79.8% of the country's total ferro silicon smelting capacity.

With decreases in supply and stocks, market fundamentals for ferro silicon improved, and its prices witnessed the first significant rebound this year. For example, the price of 75% grade ferro silicon rose by yuan 391.2/t from 29 March to yuan 6,562.4/t including 13% VAT as of 30 April.

This month, more ferro silicon smelters are expected to ramp up production amid the rising ferro silicon prices. Higher ferro silicon bidding prices from downstream steelmakers are anticipated as strengthening finished steel prices have also buoyed steelmakers' production sentiment, a Tangshan-based analyst noted.

Domestic steelmakers have been enthusiastic about stocking up on ferro silicon recently, given their low inventories of the ferroalloy, a market insider pointed out.

Mysteel's monthly survey of the 50 steel mills nationwide revealed that they currently hold ferro silicon stocks sufficient for only an average of 15.5 days of production, the lowest level in nearly five years. The 50 steelmakers under this survey host about 42% of the country's crude steel capacity.

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