Platts reported that some US ferroalloys traders see the possibility of an arbitrage opportunity opening up on ferrosilicon to China that would allow the US to export material in a reversal of the usual trade flow.

China is normally an exporter of ferrosilicon and is the world's largest supplier to the US market, shipping approximately 50% of the country's needs. However, with US steel production running at only around 45% of capacity, traders say the US has a large overhang of ferrosilicon inventories, both at steel mills and in the hands of traders, which is keeping US prices at below replacement costs from China.

Market sources said that while the price differential was not large enough at the moment to trigger any exports, they foresaw the possibility of the spread widening.

A trader noted that ocean freight rates were low and that the import duties into China were minimal. Most of the US ferrosilicon in traders' hands is stored in and around Pittsburgh and southbound barge freight rates are low as most barges head south along the Mississippi empty at this time of year.

Another trader agreed that while an eastbound ferrosilicon export trade could emerge, it could store up problems for US traders and consumers later in the year. He added that "If people did sell back to China, then that really would create one heck of a shortage in this country further down the line, and everyone would be falling over themselves to buy that material back in."

US business in ferrosilicon was very sparse, with traders reporting sporadic truckload volumes at around 65 cents per pound. But there was broad agreement between traders and consumers as to where spot market prices were and the Platts assessment for 75% Si ferrosilicon eased to 65 to 67 cents per pound FOB from 66 to 70 cents per pound a week earlier.

(Sourced from www.platts.com)