Chinese manganese alloy producers increasingly halt their operations

Continuing its weak performance over the past week, China's domestic common alloys market again recorded a minor slip in market prices on the whole. Under pressure from high costs and sluggish demand, an increasing number of manganese alloy producers have called a halt to their production operations. Meanwhile, an improvement in the domestic ferrosilicon market seems unlikely in the short term.

Over the past week market prices of manganese alloys in China have seen a minor decline. At present, market quotations of silicon manganese FeMn65Si17 are down RMB 100/mt ($15/mt) to the range of RMB 6,900-7,400/mt ($1,012-1,085/mt) in the southern regions. Meanwhile, mainstream prices of high carbon ferromanganese FeMn65 in the south are at RMB 7,000-7,100/mt ($1,026-1,041/mt), and FeMn65Si17 is still offered at $1,250-1,300/mt FOB for the export market.

With a slight slip again observed in market prices, the domestic manganese alloys market has continued to be characterized by an overall softness during the past week. Looking at the current situation, a certain rise is likely to be seen in the production costs of domestic manganese alloy producers against the background of continuing slackness of market demand. Coming up to the dry season, manganese alloy producers in Guangxi, Hunan, Guizhou and othere areas where there are many small-scale hydroelectric power stations will have to increase their usage of electricity from the national grid, resulting in a considerable rise in their electricity costs. Moreover, recently it has been heard in some southern regions that national grid electricity prices are to be hiked by RMB 0.06-0.08/kWh; if this happens, the production costs of ferromanganese and other related products will go up by more than RMB 300/mt ($44/mt). In addition, prices of manganese ore have remained at relatively high levels in recent days. Given the high quotations from overseas miners, domestic ore traders have also had to maintain their prices at high levels. Generally speaking, no improvement has been registered in market demand for manganese alloys of late. Although the order volumes from most mills have stayed at normal levels, purchase prices are quite low, exerting significant pressure on manganese alloy producers. As a result, in this context of lofty production costs and still sluggish demand, more and more medium- and small-scale manganese alloy producers have halted their operations.

With regard to ferrosilicon, the domestic market has observed a declining trend throughout the past week. The ex-factory prices of ferrosilicon (75 percent) in the northwestern regions have declined RMB 50/mt ($7/mt) to the range of RMB 5,250-5,350/mt ($779-785/mt), while domestic ferrosilicon is offered at around $1,150/mt FOB for the export market.

As a result of the overall reduction in ferrosilicon prices as well as the weakened market demand, many ferrosilicon producers in Inner Mongolia have called a halt to their production operations during the past week. Many domestic ferrosilicon producers have come under great pressure in their sales activities and have also started to see a rise in their inventories on account of the poor demand from downstream buyers and from the export market. Under pressure from high production costs and sliding market prices, most ferrosilicon producers in Inner Mongolia have suspended their operations in recent days. Based on the current situation, the Chinese ferrosilicon market is likely to continue its weak performance, with a recovery unlikely in the short term.