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| Supply And Demand Of Ferro-Silicon In Japan For Jan. - Mar. 2008 Quarter |
| = Signal To Rise The Price To Largest Extent In Its History Was Sporadically Seen |
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Let us trace the supply and demand of ferro-silicon in Japan for the first quarter (January - March) of 2008. The steel industry of Japan produced 30.835 million tons of crude steel in January - March quarter of 2008, which recorded a scale of 30 million tons per quarter following that in the preceding quarter of October - December of 2007 and maintained a higher level on the quarterly base since 1973. This tide appeared on the actual quantity of ferro-silicon consumed in Japan for January - March quarter of 2008. Namely, Japan consumed 102,514 tons of ferro-silicon in January - March quarter of 2008, having reached the level of 100,000 tons per quarter and come up to be a nearer scale to the highest record seen in October - December quarter of 2007. The world output of crude steel in the first half of 2008 renewed the record and the steel industry of Japan supported a favorable tone of the global steel production. Japan has relied the 100% supply of ferro-silicon on imports and, as a matter of fact, imported 132,548 tons of ferro-silicon (standard material) in January - March quarter of 2008 but the imports in the first quarter of 2008 were unable to exceed that (157,535 tons) imported in April - June quarter of 2007. The consumption of ferro-silicon in Japan increased but, nevertheless, the imports of ferro-silicon into Japan were restricted. When the prices of ferro-silicon imported into Japan in the last 5 years were reviewed, the extraordinarily risen prices in spring time were sporadically seen. The prices were US$1,000 - 1,050 per metric ton CIF Japan for imports in March - April of 2004 and US$1,020 - 1,060 CIF for imports in May - June of 2007. This change of price for ferro-silicon had been influenced by the reduced production in winter time at Chinese side. A potentiality to soar price of ferro-silicon had come up to the surface from the beginning of 2008 and price of ferro-silicon was maintained on a higher level for a long period of half year until June of 2008, when recorded the highest one of US$2,500 per metric ton CIF Japan. (Note : The current price of ferro-silicon has fallen to US$1,750 CIF.) The case, having risen price of ferro-silicon in spring of 2008, differed from that in the past years and many particular factors at Chinese side (China is a major country to produce ferro-silicon but their supply was affected by advanced purchases to cope with the Beijing Olympic Games, heavy snowfall emerged in spring time and troubled supply of electric power) caused this steep rise of price for ferro-silicon. The basic composition to soar price of Chinese ferro-silicon had already formed in January - March quarter of 2008. In addition, a profitability to produce ferro-silicon in China has lowered in comparison with the case to produce other ferro-alloys. Namely, a merit for production of ferro-silicon has disappeared. Japanese steel mills and trading companies overlooked this point and their countermeasures for this problem clearly delayed to implement. In view of the fact that price of silico-manganese has continued to rise from the second half of 2007, Japanese side attached an importance to the countermeasures for imports of silico-manganese and, accordingly, missed to take a careful attitude for imports of ferro-silicon. A global delay in developments of manganese resources has caused an anxiety for supply of manganese ore as raw material on a long run and the excessive imports of manganese ore into China, including the countermeasures for a confusion of inland transportation anticipated to arise in August for the Beijing Olympic Games, were arranged from the beginning of 2008. On the other hand, as regards ferro-silicon, raw material of which is thought to be easy to obtain from domestic sources (silica), the consumers concerned had held a carelessness to be able to procure ferro-silicon at any time as a potential consciousness and this blind point was hit. Originally, the cost to produce ferro-silicon in China is estimated to be CNY7,000 - 8,000 per ton (US$1,030 - 1,170) at present and even the matter, which this cost price of ferro-silicon rose to CNY11,000 per ton (US$1,600) for domestic sales, was criticized by Chinese steel mills as an extraordinary case. At that time (June), it was told that speculators were active to rise price of ferro-silicon to a considerable extent. The sources to supply ferro-silicon from China have been roughly separated into two routes. One route is direct or indirect sales by major producers, representing Erdos, and another route is an existence of traders, who are gathering ferro-silicon from medium and small producers and selling these cargoes. A substantial fluctuation of price for ferro-silicon has been performed mainly by actions from these traders. China is thought to produce more than 2,000,000 tons per annum of ferro-silicon and the movements by medium and small producers exhibit a hegemony to control price of Chinese ferro-silicon, because these producers frequently implement " nondeliveries or delayed shipments " as a trump card. These problems are due to the particular composition of production and distribution in China to appear only on ferro-silicon Unless any special reason emerges, frequent occurrences of nondeliveries or delayed shipments as seen in case of Chinese ferro-silicon will not come up in deliveries of Chinese silico-manganese. Particularly, in consequence of that both plants of Erdos Manganese Alloys and Jinzhong Nichiden Ferro-Alloys, as the bases in China to produce manganese ferro-alloys for Japan, have been stably operating, the range to be active at medium and small plants for production of silico-manganese has been largely restricted and this aspect has put a substantial influence on sales of Chinese silico-manganese. Since giant capitals led by Erdos have recently entered into the production of ferro-silicon on a large scale, it is expected that the composition to fluctuate price of ferro-silicon is going to change. In case of Japan, such blast furnace mills as Nippon Steel, JFE Steel, and so on are intending to stabilize their purchases of ferro-silicon by means of enlarging the shares for such major producers as Erdos. Posco of South Korea has also adopted the same policy for their purchases of ferro-silicon. A meeting was held on the end April of 2008 at Qipanjing of China by major producers of ferro-silicon and it seems that they have reached an agreement to stabilize supply of ferro-silicon. The second meeting was supposedly held in July and Chinese media informed that, at this meeting, plans to reduce production of ferro-silicon, to set up floor price for export (targeted on US$1,900 per metric ton FOB), and so on were discussed. This means that Chinese producers are now moving to stabilize the market price of ferro-silicon. Therefore, it is necessary to watch carefully about the movements on price of ferro-silicon at Chinese side. |
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| last modified : Fri 22 Aug, 2008 [10:45] |
