Ferrosilicon sees further upside from fundamentals and capital market

SHANGHAI, Dec 22 (SMM)－The ferrosilicon futures 1805 contract on Zhengzhou Commodity Exchange surged to upper limit on Thursday December 21 and continued its upward momentum on Friday. SMM sees support from both the fundamentals and the capital market.

Mills including Hebei Steel and Jiujiang Steel have recently issued emergency buy tenders for ferrosilicon for December due to insufficient stocks. While the final price Jiujiang secured was 9,700 yuan/mt, major sellers have said their offers were 11,000 yuan/mt and were unwilling to negotiate.

Hebei Steel, on the other hand, issued a second tender for December this week and market talk suggested it may be concluded at 10,600 yuan/mt.

In fact, sources told SMM that the ferrosilicon inventories at many steel mills could only last until early January. This showed that consumption remained active due to winter restocking and increasing usage of steel scrap.

Supply, however, remained severely insufficient. It is unclear when production at alloy plants in Ningxia province would resume. The earliest delivery is likely to be mid to late February if production resumed in January.

SMM believes demand for ferrosilicon would continue to be strong in January.

In the capital market, Huaxin Futures has added 14,574 lots of long positions for the 1805 contract earlier this week, driving up the ferrosilicon prices. The contract has an open interest of 163,208 lot as of Friday.

This followed the Central Economic Work Conference held this week with a better economic outlook for 2018. According to Chen Jianwei, general secretary of Yuxin Investment Management, the capital market has made some corrections to its previous over-pessimistic views on the economy. 

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