Silicomanganese Alloy Market Review and Forecast (Dec. 17-21)

SHANGHAI, Dec. 23 (SMM) –

Review
Silicomanganese alloy markets held stable this week. Mainstream ex-works prices for SiMn 65/17 were RMB 6,900-7,100/mt in the form of acceptance bill. SiMn 60/14 prices stabilized amid slack demand, but inched down in a few regions, with mainstream traded prices between RMB 5,500-5,620/mt in Guangxi. Ex-works prices for non-standard #50 silicomanganese alloy were RMB 4,900-4,950/mt (excluding tax) in Hunan, down RMB 50/mt from the previous week. CITIC Pacific Specia Steel Holdings and Taiyuan Iron & Steel Group this week announced purchasing prices for silicomanganese alloy for January and February, up RMB 150/mt and RMB 100/mt, respectively from December, heightening market optimism over future markets.

Supply
Operating rates at silicomanganese alloy producers in north China remained high this week, and also held stable in producers in south China. According to SMM sources, producers in Guangxi’s Chongzuo and other regions increased production due to government electricity subsidy, and a few producers planed to resume operations on expectation on a cut in electricity prices. SMM anticipates little possibility of steel plants in the coming week slashing purchasing prices for silicomanganese alloy for next month. Overall operating rate at China’s silicomanganese alloy producers will hold stable in the coming week, but will likely increase slightly in Guangxi.  

Demand
Steel prices fell after initially rising this week. On Monday and Tuesday, prices rose noticeably on favorable macro news, but began moving down on Wednesday. SMM learnt that only traders were actively buying following price increases, but terminal users still expressed low buying interest, resulting in no significant improvement in steel market transactions. Steel prices later in the week remained weak amid slack demand but any downside room was limited owing to support from production cost. SMM sees no major changes in the fundamentals side and macro front in the coming week, the last trading week of 2012, and that that steel prices will extend weakness. But prices of steel used in construction are expected to drop marginally, and hot-rolled steel prices will fluctuate narrowly. 

CITIC Pacific Specia Steel Holdings and Taiyuan Iron & Steel Group will take the lead in buying silicomanganese alloy for January and February since Chinese New Year holiday will fall in the middle of February. Some steels will appropriately raise the purchase volumes, and some will buy as needed since their stocks are relatively high. Collectively, purchase volumes of silicomanganese alloy from steel plants next month will increase slightly from a month ago.

Cost
Imported manganese ore prices this week were little changed from the previous week.

Guizhou was not seen to issue the electricity subsidy, with some regions reporting that the government may cancel the subsidy. Some regions of Guangxi like Chongzou in the coming week will execute electricity prices before September, down RMB 0.0567/kwh from prices at present. 

Prices of coke particle and semi-coke remained virtually stable this week. Some semi-coke producers still reported high stocks as market transactions were modest. Ex-works prices for semi-coke in Shaanxi’s Fugu were still RMB 910-920/mt (in cash, including tax).

Forecast
Procurement period for steel plants will arrive in the coming week, but bidding prices of silicomanganese alloy are anticipated to see no noticeable increases. Traded prices for SiMn 65/17 will not see major changes either. In the face of poor operations at small steel plants and  foundries, demand for both SiMn 65/17 and non-standard silicomanganese alloy is unlikely to increase but remain weak in the coming week.