Silicomanganese Alloy Market Review and Forecast

SHANGHAI, Nov. 19 (SMM) –

Review
As silicomanganese alloy market was still positive last week, cargo-holders generally quoted firm prices and exhibited strong reluctance in moving goods. Steel traders continued buying actively, resulting in modest market transactions. Prices for #6517 silicomanganese alloy gained RMB 50-100/mt in most regions during the week. Mainstream ex-work prices for #6517 silicomanganese alloy in the form of acceptance bill were RMB 6,800-6,850/mt in Ningxia last Friday, RMB 6,900/mt in Inner Mongolia, and RMB 6,700-6,800/mt in south China. Mainstream traded prices in cash for #6517 silicomanganese alloy were RMB 6,500-6,550/mt (excluding tax) in Anyang. Prices for #6014 silicomanganese alloy rose slightly, but cargo-holders quoted mixed prices, with deals mainly made between RMB 5,600-5,700/mt (in cash) last Friday. Non-standard silicomanganese alloy prices increased by RMB 50-150/mt. 

Supply
Operating rates at silicomanganese alloy producers last week were little changed from the previous week. Producers in north China mostly conducted operations based on orders, so spot goods there were relatively limited. However, spot silicomanganese alloy supply was plentiful in south China, but most cargo-holders chose to withhold goods since many regions raised electricity prices. SMM expects no major changes in operating rates at silicomanganese alloy producers in the coming week, although rates tend to fall marginally at producers in Guangxi where electricity prices have been increased considerably and raw materials have been nearly used up.   

Demand
Performance for different kinds of steel was mixed over the past week. Prices for steel used in construction still moved down, while those for hot-rolled steel continued rising but with gains slowing. Prices for hot-rolled steel even had signs of slipping in some regions last Thursday. Prices for HRB335 rebar of 16-20mm averaged RMB 3,762.2/mt in China, down around RMB 43/mt, or a loss of about 1.12%, larger than the prior week's decline of 0.88%. The average price for hot-rolled steel last week gained 2.3%, slightly smaller than the increase of 2.7% a week ago.

Steel mills can still report profits last week and generally did not plan for unit maintenance, which can help maintain market supply. Nevertheless, steel sources have flowed into south China from north China, negative for both market sentiment and market prices. In addition, as it becomes colder, steel demand has definitely weakened, and tight cash flows at the year's end will also negatively impact markets somehow. In this context, SMM anticipates that demand for steel applied in construction is likely to drop in the coming week, and that prices for hot-rolled steel may fluctuate and even dip in some regions.

Cost
Adjustments in electricity prices were rarely reported last week, and many silicomanganese alloy producers in Hunan and Guangxi were awaiting subsidies from the government. Spot imported manganese ore supply was tight in north China, with prices for some kinds of goods raised slightly by RMB 0.5/mtu. Traded prices for coke particle were stable temporarily over the past week. Prices for calcium carbide trended down last week, while traded prices for semi-coke retreated slightly by RMB 20-30/mt in some regions amid sluggish demand and modest market transactions.

Forecast
Markets are generally optimistic over future silicomanganese alloy prices, but as production costs have increased, producers may continue to quote mixed prices in the coming week. Uncertain factors in electricity prices and operating rates have abated over the near term, helping maintain silicomanganese alloy traders' interest in stocking, but they and steel mills already become more rational with regard future prices. As such, SMM holds the view that silicomanganese alloy prices will probably fluctuate in the coming week.