Chinese Ferroalloys Output in Q1 2009 Decrease by 7%

BEIJING, May 25 -- China produced 3,928,900 tonnes in total of ferroalloys in January to March quarter of 2009, having decreased by 7.10% compared with that in the same quarter of 2008.

    For a reference, China produced 1,574,200 tonnes in total of ferroalloys only in March of 2009, which had a decrease of 6.8% compared to that in the same month of 2008.

    In comparison with a slight increase of crude steel production in China for January to March quarter of 2009, the total output of ferroalloys in China for the quarter decreased to a considerable extent. This decline in production of Chinese ferroalloys was due to a sluggish tone on exports of ferroalloys from China and a sharp fall of prices for ferroalloys caused by the depressed market. However, when the production activities of ferroalloys at each district of China in the first quarter of 2009 were investigated in detail, the quantities of ferroalloys produced in the so-called silicon land, consisting of Inner Mongolia Aut Region, Ningxia Hui Aut.

    Region and Gansu Province had large decreases of 22% to 57% from those in the same quarter of 2008. These decreases in production of ferroalloys had been caused by a severe winter climate but, as the silicon land faced the same severity in winter season of last year, the circumstances in both of 2008 and 2009 are thought to be on a similar level. Only the reason, why the production of ferrosilicon in China for the first quarter of 2009 had a substantial decrease, is supposed to be a negative intention to produce ferrosilicon as its price has fallen steeply. However, in August to September of this year when the stocks of ferrosilicon in Far Eastern region including Japan are anticipated to be reduced to reasonable levels, it is worried that price of Chinese ferrosilicon may have a sharp rise on the background of the tight supply.

    On the other hand although it was once informed that the production of manganese ferroalloys in China is anticipated to have large decreased main districts in China contrarily increased the production. In view of the fact that China also produces manganese ores at local mines, main areas to produce manganese ferroalloys in China have been symbolized by the four districts of Sichuan Province, Guizhou Province, Guangxi Zhuang Aut. Region had a slight decrease of 5.8% in production of manganese ferroalloys but other three districts increased their production by 41.6% in Sichuan Province, by 46.4% in Guizhou Province and by 33.1% in Hunan Province respectively compared to those in the same quarter of 2008.

    The market prices of manganese ferroalloys had once reached a peak in August of 2008 but, after that, have turned to fall. Price of Chinese silicomanganese has currently come down to a level of USD 1,100 per tonne CIF Japan which is half of USD 2,450 as prevailed previously. Price of high carbon ferromanganese is USD 1,300 per tonne CIF Japan at present.

    Needless to say, these prices are not payable for its production costs. Accordingly, it was once informed that these manganese areas as mentioned above have decreased their output of manganese ferroalloys in the Q1 of 2009 to a large extent but, on the contrary, the data indicated certain increases in production of manganese ferroalloys at these areas. The market prices of Chinese manganese ferroalloys, such as silicomanganese, have suddenly fallen considerably from February to March of 2009 and one of the reasons for this sharp fall of prices is supposed to be due to an increase in production of manganese ferroalloys. It goes without saying that other factors are a sharp fall of prices for manganese ores imported into China as raw material and a positive action on sales of silicomanganese at discounted prices taken by India.

    As an aftereffect on excessive imports of manganese ores committed by China in 2008, a surplus of manganese ores stocked in China is estimated at 1 million tonnes to 2 million tons and it is essential for China to digest these excessive stocks of manganese ores as soon as possible. Even under the present situation which the international prices of manganese ores are in the direction to fall further for the future, China has been urged to digest the stocked raw materials. The main areas to produce manganese ferroalloys in China are those, having delayed to develop its economic circumstances, and many of these areas have positioned to produce ferroalloys as a core business for local economy. Therefore, from a point of view to sustain local economy, it is difficult for these areas to reduce their production of ferroalloys.

    (Source: Tex Reports)