Metals News
Smaller Room for Domestic EMM Prices to Fall
smm insight
Mar 11,2010

SHANGHAI, Mar.11 (SMM) -- Today, mainstream offers of EMM were in the RMB 15,100-15,200/mt range, and limited transactions were made at RMB 15,000/mt yesterday. Number of producers who moved goods at low prices increased, but wait-and-see sentiment from traders and downstream stainless steel mills was still strong.

It was reported that some producers that were under cash flow pressure began to move goods for the concern of constantly decline of EMM prices in the future. According to a producer with capacity in the 5-10 kt/yr range in Hunan province, transactions were sluggish in EMM market within recent two weeks, and the producer planned to move a portion of goods for a better cash flow. If EMM prices continue to decline in the future, the producer will plan to halt production given current high costs of raw materials.

It was reported a wait-and-see sentiment from traders and downstream stainless steel mills was slightly strong. According to a trader in Dainan, "Demand from stainless steel mills still hasn't improved in Dainan, resulting in sluggish transactions and low EMM prices. Therefore, I have no plan to replenish stock in a large amount."

In general, demand of EMM was relatively soft at present. Stainless steel industry was in a sluggish situation and selling prices of stainless steel were nearly the same as the costs at private stainless steel mills, so purchasing interest from stainless steel mills was slightly low. In addition, situation at manganese alloy producers was also depressing, as bid volumes and bid prices from large steel mills in March were both down. Meanwhile, tight supply of electricity due to severe drought in Yunnan, Guizhou and Sichuan provinces exerted negative impact on operating rates at manganese alloy producers. In this context, most manganese alloy producers still adopted a wait-and-see attitude, although some alloy producers that singed contract with steel mills still inquired prices and purchased goods in a limited amount. What's more, exporters also reported that there were more inquiries but limited orders in export market, and it still needed time for the exporting market to recover.

Supply of EMM should not be ignored, although demand was relatively weak. Currently, mainstream costs at EMM producers were in the RMB 14,500-15,000/mt range. If prices fall below costs, EMM producers without cash flow pressure will not move goods at low prices and will wait for a more favorable opportunity to move goods in the future. While, small EMM producers with cash flow pressure will also not be eager to move goods and plan to halt production instead. In this context, supply of EMM will reduce significantly in the market. In addition, stably high costs at EMM producers will also lend relatively strong support to EMM prices.

In this context, SMM believes that domestic EMM prices will not likely improve, but any room for EMM to fall will be smaller.

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