Ferrosilicon market polarization shall be treated reasonably

Asian Metal: Hello, Mr. Wang! Thank you very much for accepting the interview of Asian Metal. Firstly, please give us a brief introduction about the main business of your company.

Wang: Our company mainly produces and sells textile, metallurgy, coal and chemical products, including ferrosilicon, silicomanganese, ferromanganese, silicon carbide, coal, calcium carbide, PVC, cement, urea, synthesis ammonia, caustic soda, cashmere clothes and so on.

Asian Metal: How about the production and sales of ferrosilicon of your company in 2017?

Wang: Global output for iron and steel increased by 5.1% in first 7 months of 2017 and the smuggle activities in border trade was restricted in May, which made our export orders increase substantially with demand in the spot market up dramatically. However, Chinese ferrosilicon producers have kept low operating rate in recent years. Making good use of tight supply in the spot market which started from June and taking advantages of the recycling economy of Coal-Electricity-Ferroalloy, we realized excellent financial results in first 8 months of 2017.

Asian Metal: What’s the main reason for the polarization of ferrosilicon prices in the spot market?

Wang: Prices for ferrosilicon kept going up in the spot market in August and the bidding price of RMB9,500/t inevitably drove the market into a crazy condition with market participants once generally hoping ferrosilicon prices to rise over RMB10,000/t. However, due to the lack of supports, prices for the material fell back after touching the top level. Market participants’ attitude of “purchasing when prices are high while selling when prices are low” made ferrosilicon market turn into a big mess. In order to avoid risks, small and medium-sized companies sold at lower prices, leading to decreased prices in the spot market and causing the prices into a polarization situation. Among many suspicions and predications, HBIS, Ansteel and other large steel mills decided their bidding prices, which were relatively reasonable and thus eased the panic phenomenon in the market. We shall treat the polarization of ferrosilicon prices reasonably and can’t neglect the domestic market structure of ferrosilicon which referred to that about 70% of ferrosilicon market in China is occupied by large producers who have a right of speech. It’s really reasonless to sell the material at much lower prices when the supply and demand condition in the spot market is favorable.

Asian Metal: What do you think of the price trend of ferrosilicon in the spot market currently?

Wang: Large ferrosilicon producers have supported prices for the material not to go down further, which is effective. It’s worth noting that the supply of mainstream producers is still in shortage with limited stocks on hand; The pressure of the environmental inspection has been eased to some extent in Qinghai while the environmental team is about to reach Ningxia; steel mills and magnesium plants keep full running capacity with firm prices and generous profits for their own products; demand for ferrosilicon in the export market has been strong in recent months as the smuggle activities have been restricted. There are still some supports for ferrosilicon market to be positive and hopeful and it’s still possible enough to keep the current market condition and certain profits. We shall pay more attentions to the research and analysis on the market condition rather than only see the changes of prices which are not sufficient for us to judge whether the market has changed or not. Opinions which noted that ferrosilicon prices will be over RMB10,000/t when prices for the material keep increasing or claimed that prices for the material will be less than RMB6,000/t when prices begin to fall back after touching the top level are unbelievable.

Asian Metal: Now that prices for ferrosilicon have changed, what do you think of the positivity of consumers in purchasing?

Wang: After entering August, steel mills opened bidding for ferrosilicon of September in advance and raised purchase volumes as the supply from large producers who mainly supplies the material to steel mills was tight. After investigations on quotations from ferrosilicon producers, major steel mills raised their bidding prices for ferrosilicon to RMB8,950-9,150/t.

Asian Metal: What do you think of the operating rate of ferrosilicon currently? Will it go up further under current market condition?

Wang: The operating rate of ferrosilicon producers is about 85% now and to some extent we can say that all furnaces which can be operated have already been operated with other zombie companies having difficulties in resuming production in the near future due to the environmental inspection, the safety production procedure, problems in funds and debt and so on.

Asian Metal: What’s the plan of your company in the future?

Wang: Our company shall make good use of the advantage in stable supply as “world capital of silicon” and further strengthen internal management in order to improve the quality of our products. It’s well known that details determine success and failure and thus we will offer more considerate and intimate service to end users.

Asia Metal: Thank you once again for accepting the interview of Asian Metal. We wish your company a better future!

Wang: Thank you!