The trend of ferroalloys has continued to weaken recently, mainly due to the weakening of macro expectations, and the price of ferroalloys has followed the decline of ferrous commodities. However, in terms of absolute prices, the prices of ferrosilicon and silicomanganese have fallen by more than 50% compared with last year’s high point. How will the price of ferroalloy be deduced in the future? Is it possible to buy the bottom now?
1.The characteristics of ferroalloy price operation in the past year
After October 2021, the dual control policy for energy consumption will be gradually withdrawn, the output of ferroalloys will rebound rapidly stimulated by high profits, and the imbalance between supply and demand will be alleviated, leading to a rapid decline in futures prices. The price of ferroalloy is rapidly approaching the cost. At the beginning of 2022, it will quickly hit negative profits, causing manufacturers to actively reduce production. Subsequently, with the start of production of ferroalloys and the adjustment of production, profits have been restored to near breakeven. The production of ferroalloys bottomed out and then rebounded, while prices continued to fluctuate near the cost line. As of the beginning of November 2022, the production of silicomanganese and ferrosilicon is still rising and has reached or even exceeded the central level of previous years. This has also resulted in the continuous low-level operation of ferroalloy profits. At the moment when controllable dual control is gradually drifting away, low profits will continue for a long time
2.Ferroalloy Cost Analysis
In the cost of ferrosilicon, electricity accounts for 60-70%, which has the greatest impact on the cost of ferrosilicon; semi-coke accounts for 25-30%; raw material silica accounts for 2%, and silica has little impact on the cost of ferrosilicon. In the cost of silicomanganese, manganese ore accounts for 60%, mainly relying on imports; electricity accounts for 20-25%; coke accounts for 10-15%. From 2017 to 2019, after the expansion and de-capacity of production capacity, the price of commodities as a whole stabilized and fluctuated within a small range. According to the price bottom center and consumption of each raw material, it can be calculated that the bottom center of the cost of ferrosilicon in the past was 5,500, and that of silicomanganese was 6,000.
At present, the bottom center of the ferroalloy cost has shown a significant upward trend, mainly due to the electricity price: my country’s electricity price is relatively stable, but there will be a large-scale adjustment in 2021, and the main ferroalloy production areas will basically face an increase in the electricity price. . In some areas, the electricity price will be lowered in 2022, but overall, the electricity price center will still show a significant upward movement. This is the core factor that causes the current cost center of ferroalloy to move upward. At present, the electricity prices in Shaanxi, Shanxi, Inner Mongolia, Qinghai, and Gansu have moved up by more than 10 cents compared with the center, and the average electricity price in the main production areas has moved up by 1 cent. Calculated according to the electricity consumption of silicomanganese and ferrosilicon, the cost of silicomanganese is increased by 400, and the cost of ferrosilicon is increased by 800. In addition, the price center of semi-coke and metallurgical coke has also moved up to a certain extent, and the cost of silicomanganese and ferrosilicon has risen to a certain extent.
In the future, there is not much room for a further decline in electricity prices in ferroalloy high-energy-consuming industries. Although it is difficult for semi-coke and metallurgical coke to return to the bottom of the past, there is still room for them to continue to return. Due to the high inventory of manganese ore, there is no solution in sight, and there will not be too much market price. The price of manganese ore will fluctuate at the current bottom for a long time in the future. The future cost bottom of silicomanganese is inferred as the original bottom price (6000) + electricity price increase (400) + metallurgical coke increase (100) = 6500 yuan/ton, and the future cost bottom of ferrosilicon is inferred as the original bottom (5500) + electricity price push up (800) + semi-coke push up (300) = 6600 yuan/ton.
3.Prospects for the trend of ferroalloys
At present, ferroalloy manufacturers are still maintaining a fierce competition pattern, resulting in the continued meager profits of ferroalloys. However, from an absolute price point of view, the price of ferroalloy raw materials and electricity has limited room to fall, so it is difficult for the prices of silicomanganese and ferrosilicon to fall again. In particular, due to the low price of manganese ore, there is not much room below the price.
