Futures Daily
fromFerrosiliconFrom the perspective of market supply and demand pattern and cost and profit, the current main production areas have the conditions for large-scale resumption of production. Before the National Day, under the background of restocking by steel mills, supply and demand are temporarily in a tight pattern, and the ferrosilicon disk still has a certain upward driving force. However, if the disk rises to a high level, the willingness to resume production in the main producing areas will be strengthened, which will fundamentally reverse the tight supply of ferrosilicon.
Since July, the supply side of ferrosilicon has begun to shrink rapidly. As of late September, there has been no large-scale production in the main producing areas. Judging from the monthly production of ferroalloy online statistics, the national ferrosilicon production in August decreased by about 25.5% from the high point in June. In terms of sub-regions, the production of ferrosilicon in Ningxia fell the most. The monthly output in June was still 127,000 tons, and the output in August was reduced to 59,000 tons, with an overall decline of more than 50%. However, judging from the weekly production statistics of the Steel Federation, the supply of ferrosilicon has stabilized since the end of July. As of September 23, the daily output of ferrosilicon has rebounded to 14,300 tons, an increase of 9.16% from 13,100 tons at the end of July. Due to the largest production reduction in Ningxia in the early stage, it is necessary to focus on the resumption of production in this production area in the mid-term.
The demand side of ferrosilicon has oscillated downward since June, but the downward magnitude is not as good as that of the supply side. In addition to steel mills, the demand side of ferrosilicon also includes metal magnesium, exports and stainless steel. In terms of demand for steel mills, in September and October, steel recruitment was superimposed to replenish steel mills before the festival, long-process steel mills continued to resume production, and the Southern Electric Furnace Plant is also stepping up production resumption after the lifting of high-temperature power cuts, although it is limited by the supply of scrap steel. , the production rhythm of short-process steel mills is limited, but the overall steel mills’ demand for ferrosilicon continues to increase. In terms of demand for magnesium metal, since the beginning of this year, the quotation of metal magnesium has continued to decline. As of the beginning of August, the quotation of metal magnesium in Shaanxi has dropped from 50,000 yuan / ton at the beginning of the year to 22,450 yuan / ton, a decline of more than 55%, and industry profits have been compressed to 22,450 yuan / ton. Below 2,000 yuan/ton, and stabilized at around 25,000 yuan/ton at the end of September. In terms of export demand, since June, the export volume of ferrosilicon has oscillated and weakened due to the downturn in overseas demand, but the overall export volume of ferrosilicon is still at a year-on-year high. In terms of stainless steel demand, since June, stainless steel production has continued to decline. As of August, the monthly output of stainless steel crude steel has dropped from 2.8673 million tons in May to 2.2529 million tons, with an average monthly decline of 7.71%.
From the perspective of cost and profit, the cost line of ferrosilicon is relatively stable this year, and the profit level has risen and fallen due to the influence of spot quotations in the main producing areas. In late September, the price of ferrosilicon in recent months soared to 8,400-8,550 yuan/ton, and the warehouse receipts converted into production costs in Ningxia have a certain profit range. The cost side of ferrosilicon mainly includes electricity, blue carbon, and silica. Taking Ningxia as an example, the production structure of ferrosilicon is as follows: electricity cost accounts for 51%, blue carbon accounts for 26%, and silica accounts for 5.6%. Smelting 1 ton of ferrosilicon consumes about 8000 kWh of electricity, 1.1-1.2 tons of blue carbon, and about 1.95 tons of silica. It is estimated that the average production cost in Ningxia in 2022 will be 7,767 yuan/ton, and the profit level at the beginning of the year will be within 200 yuan/ton. After the large-scale production reduction in the main production areas, the profit level in Ningxia has been restored to the break-even range. As of late September, the profit range in Ningxia has returned to between 200-300 yuan/ton. Calculated by converting the production cost into the cost of the warehouse receipt, the recent monthly disk price between 8300-8500 yuan / ton has given a spot hedging profit of 250-450 yuan / ton.
On the whole, although the current supply and demand pattern of ferrosilicon is in a tight state, it is expected that the supply and demand in the medium term may become loose from tightness, the cost support is limited, and the ferrosilicon disk has the risk of falling from a high level. Affected by the end of the restocking of steel mills before the festival and the expected production reduction of steel mills in the fourth quarter, there is a weakening expectation on the demand side. The supply side focuses on the Ningxia area. If spot profits and theoretical spot hedging profits can stimulate the willingness to resume production in Ningxia to substantively resume production, this part of the supply increase will fundamentally reverse the current tight supply and demand pattern of ferrosilicon. After the festival, we need to be alert to the risk of falling back from the high level of the ferrosilicon disk.(Author: Zhongtai Futures)
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