China’s ferro-silicon market worsens
June 5th, the day Beijing will raise the export tax on ferro-silicon, is fast approaching, and many enterprises accordingly have been adjusting their sales focus to the Chinese domestic market. This situation has led to a worsening of the ferro-silicon supply and demand situation in China, precipitating an outbreak of fierce price competition. Certain Chinese ferro-silicon traders have stopped their production or have begun concentrating on the production of other ferro-alloys. Other producers are struggling to continue their operations without any profit margin. "We have been doing our utmost to decrease our product cost so as not to lose profit or just lose a little profit; however, high electricity costs have brought more difficulty in controlling our product cost," indicated one sales manager of a ferro-silicon plant in Gansu province. “But we cannot stop our production, because we have to support all workers in our plant and try to collect capital to continue our production. At present, we just hope to operate without losing profit. As for ferro-silicon export, we will sell our products if we do not lose profit." There has been direct export pressure on the ferro-silicon market. After the new tax levy policy takes effect, the cost of ferro-silicon will rise by $30-40/ton, and Chinese ferro-silicon producers do not hold out hope that they will be able to transfer these costs to foreign purchasers. "There will be a transition period for both sides to prepare for the price adjustment that will be accepted and adopted gradually," the producer in Gansu province indicated. The Gansu producer also doubts some producers' price quotations of $650/ton (FOB) for June 5th. “It is difficult to reach this price level during such a short period, and we are not sure of the export quotation for June 2005," he explained. At present, ferro-silicon exports for May have been completely booked. The Gansu producer gave several reasons for May's booming export situation. First, China's ferro-silicon producers are not sure of the market situation for June 2005, thus many enterprises have begun to sell their products at a low price. Second, taking advantage of producers' anxieties about selling their products and intending to avoid the Customs tax, foreign purchasers have driven down the ferro-silicon price and purchased large quantities of ferro-silicon from China. China’s domestic ferro-silicon market has suffered pressure from exports, and it is difficult to conclude any deals in the Chinese ferro-silicon market. "As for ferro-silicon trade in China's domestic market, we will sell if we can get the bottom products cost or a little lower than this price. According to the present market situation, the price around RMB 4600/ton means losing profit," explained the ferro-silicon producer in Gansu. A producer in Yunnan province commented: “The ferro-silicon price in China's domestic market has been decreasing continuously, while that of electricity and transport in China has been rising. Thus, the ferro-silicon production situation in many areas has been insufficient, and ferro-silicon trade has become difficult.” "Our plant will change to produce ferro-chrome next month," added the Yunnan producer. A ferro-silicon producer in Lanzhou indicates that since ferro-silicon costs in China's domestic market have maintained a high level and ferro-silicon prices have competed fiercely, their plant has barely broken even. The producer's plant plans to stop production of another ferro-silicon furnace next month.