Ferrosilicon prices in North America to go up in H2

Asian Metal: Hello Mr. Lazar, please briefly introduce your company.

Barry Lazar: MEDIMA has been engaged in providing ferroalloys to steel makers and foundries for fifteen years, and it was purchased by Traxys in May last year.

Asian Meal: How do the long-term orders and spot orders approximately account for your business in the North America market?

Barry Lazar: We focus on the North American market. For North America, the majority of contracts usually are annual formula contracts based on changing monthly or quarterly index. For me, the index contracts probably account for as much as 80% of the contracts in our North America market, and spot deals accounts around 20%.

Asian Metal: Are there any changes or differences this year under the consecutively tight supply in the North America for the long-term contracts and spot contracts?

Barry Lazar: In general, the large ferrosilicon producers operating in North America tend to focus on booking index contracts, but this year we did see more fixed-price contracts than we had seen in the past. There has been a definite trend that more and more contracts are being signed with fixed prices. Our suppliers refused to participate in index contracts as they did not view the index as reflective of the market. Moreover, previously most customers purchased on annual index based formula contracts, and this year they are taking more than suppliers expected. More fixed-price contracts were signed with shorter periods due to the short supply and crazily increased ocean freight. For us, at least half of my long-term contracts were signed with a shorter period based on fixed prices. Over time, the index has started to mean less and less as suppliers refused to offer on index. The main index historically CRU used for ferroalloys in the USA began to not reflect the reality on the market. The trend looks to continue.

Asian Metal: How about the steel mills' operation rates in Q2, compared last Q2?

Barry Lazar：It appears that we are emerging from the COVID shutdowns of last year, and business sentiment dramatically improved and the steel prices have aggressively increased as well. According to the related data, the crude steel output in North America reached about 10.1milliont in May 2021, up by 47.7% against last May, leading to the sharp increases in steel manufacturing. Foundries are also very strong, and we see dramatic improvements across both foundry and steel segments.

Asian Metal: Where does the imported ferrosilicon in the US origin from? Are there any obvious changes of import volume from each country during the first half of this year?

Barry Lazar: The ferrosilicon in the US mainly origins from Russia, Brazil, Malaysia and other countries as well domestic producers. For the spot market in the US in the last few years, Brazilians supply large quantity of the whole amount in the spot market, and Brazilian ferrosilicon export volume to the US began to decrease earlier this year stimulated by the increased demand from steel mills in Brazil, and the cheap Brazilian offers started to dry up. Additionally, logistics costs escalated especially for container rates and ferrosilicon prices moved sharply up. Additionally, a demand improvement in the European markets also led to more demand from Europe and so ferrosilicon price has risen sharply to its present market price. The major supplier for long-term contracts to this market has been RFA in the last few years, and the Russian Government plans to impose export tariff of 15% for ferrous and non-ferrous metals from August 1th to December 31th. As the largest importer into the US market, the export tariff on Russian ferrosilicon would have an effect on the Russian pricing in the US market. Suppliers are using this to push prices higher.

Asian Metal：Current prices of ferrosilicon 75%min 10-50mm in the US spot market hover at USD1.45-1.50/lb Si D.D.P (June 20), reaching the highest point in the past 10 years. Do you think the price would go up further?

Barry Lazar：I do believe prices of ferrosilicon in the North America could still move up higher than this level as we have limited spot business in this market. The scary thing is that almost all traders don't have ferrosilicon stocks in warehouse in USA and so once the producers can't offer or already pre-sold out all outputs then it could be very difficult to locate material. Traders are not speculating at this price level, and they're not bringing in unsold ferrosilicon which means the buffer stock of unsold inventory in the US warehouses has disappeared.

Asian Metal: How do you balance the strong demand and the short spot supply due to the difficulty of replenishing stocks? Are you holding back from selling?

Barry Lazar：I think most companies now have moved to a back-to-back sales strategy from selling stocks. So if we get an inquiry for ferrosilicon, we are only offering if we have firm support of material. Normal annual customers purchasing based on long-term contracts all seem to be taking large quantities and running hard, which means we have less material for spot opportunities. We are all selling what we have at these prices. For me, the only question is replacement, and we sell back to back on offers, and it's too expensive to contemplate a sales strategy.

Asian Metal: How do you assess the ferrosilicon demand and price trend in the second half of 2021?

Barry Lazar：It appears that demand will maintain keeps strong going forward in H2 2021 and we don't see any decrease in demand. The steel production keeps very strong in North America stimulated by the coming in infrastructure bills. So far we don't see a break in the high logistic costs, and demand is strong across many different markets such as steel mill and foundries. We don't see any large negatives although inflation worries are starting to emerge and the inflation will or should have an effect at some stage, and I still believe prices of ferrosilicon 75%min in the US would go up in the second half of 2021.

Asian Metal: What's your plan of your company for future? Are there any new industries you will be involved in?

Barry Lazar: We are focusing on maintaining our regular clients and suppliers especially under the world-wide tight spot supply situation. We're always interested in new industries that fit with our current business and explore them if they make sense.

Asian Metal：Thank you for your time Mr. Lazar.

Barry Lazar: Thank you.