Increased electricity costs push up Chinese common alloy prices

Over the past week China's domestic common alloys market registered a continuous rise on the back of increased electricity prices. As a result of the announcement made on November 20 by China's National Development and Reform Commission (NDRC) regarding increased electricity prices for non-residential users as of December 1, the production costs of alloy producers in China jumped up, and so some producers have increased their product prices in order to relieve the cost pressure.

Over the past week market prices of manganese alloys in China have continued to move up. At present, market quotations of silicon manganese FeMn65Si17 have risen RMB 150/mt ($22/mt) to the range of RMB 7,250-7,550/mt ($1,062-1,107/mt) in the southern regions. Meanwhile, mainstream prices of high carbon ferromanganese FeMn65 in the south are up RMB 100/mt ($15/mt) to RMB 7,100-7,200/mt ($1,041-1,056/mt), with FeMn65Si17 offered at $1,300/mt FOB for the export market.

Maintaining its uptrend, the domestic manganese alloys market has risen mainly on the back of the increased electricity prices. In the Shanxi, Hebei and Inner Mongolia regions, given the overall hike of RMB 0.028/kWh in the electricity price, as well as the higher transportation costs, local manganese alloy producers have generally observed an increase of RMB 200/mt in their production costs. Furthermore, in the central southern regions, some producers have even had to suspend their operations in recent days due to the power shortage caused by the dry season. Under the combined effects of these factors, the Chinese manganese alloys market began to pick up over the past week. Currently, market quotations of manganese ore have remained at relatively high levels. The international mining giant BHP Billiton recently announced unchanged prices of its manganese ore prices for January 2010, compared to December levels. Thus, the price of 44 percent manganese ore (lump) is around the level of $6.5/mtu CIF, while that of 43 percent small grain is at $6.06/mtu CIF.

With regard to ferrosilicon, the domestic market has climbed up in the past week. The ex-factory prices of ferrosilicon (75 percent) in the northwestern regions are up by RMB 200/mt ($29/mt) to the range of RMB 5,550/mt ($814/mt), while domestic ferrosilicon is still offered at around $1,150/mt FOB for the export market.

In the past week the domestic ferrosilicon market has remained on an upward trend, with most players adopting a wait-and-see stance. Following the increased electricity prices for non-residential users announced by the National Development and Reform Commission (NDRC) on November 20, some northwestern and northern-based ferrosilicon producers began to hike their quotations, while others have stopped giving out quotations, deciding to stand aside from market trading for the moment. Looking at the current situation, with rising momentum still evident, Chinese domestic ferrosilicon prices are likely to go further up in the coming period, but only by a small margin.