Market outlook of the imported ferroalloys in Japan as of June 15th 2012 is as follows:
China is still playing low keys. Crude steel production in May 2012 increased only 1.6% MoM from April 2012. Increase in the production during the first 5 months of 2012 was 2.1% YoY as compared to the same period of 2011, while the same five month comparison between 2011 and 2010 gave more than 10% increase. This 2.1% is an increase, but fairly small one, implying that China's overall economic growth is definitely slowing down and that the current slump in demand for ferroalloys will drag on for another while. Capacity utilization rate for ferrosilicon in major producing areas is more or less 50% and production of silicomanganese has been under continued pressure from weak demand.
In Japan, concern of the market is focused on the quarterly price (in Yen currency) negotiations with EF mills for the Q3 (July to September) deliveries of silicomanganese and ferrosilicon, as the negotiations are due to commence anytime now. The trend is downward compared to the Q2 (April to June). According to a distributor of silicomanganese, it will be unavoidable to accept a large price cut of more than JPY 10,000 per tonne, because the increase in the Q2 of about JPY 20,000 per tonne was a bit too much. As to ferrosilicon, it is not easy to forecast where the Q3 price will end up. One of the trading houses expresses a hope that the price be rolled over, but there is a possibility of some decrease in Q3 price in Yen, as offer prices from China are likely to slide based on the continuing oversupply situation.
The price of silicomanganese for the Q2 (April to June) 2012 was JPY 115,000 to JPY 118,000 per tonne, delivered. The offers from Indian producers merchants are currently at USD 1,170 per tonne CIF, down about USD 130 per tonne compared to the end May 2012 price, mainly because of the weakened Indian Rupee. If a price decrease of JPY 10,000 per tonne, for example, is agreed with the EF mills for the Q3, the price will dip below JPY 110,000 per tonne, which is most probably a loss making level for those merchants who failed to sell out stocks of higher priced materials. Under these circumstances, merchants need to secure the lowest possible price in the negotiations with the Indian suppliers.
Sellers of ferrosilicon to EF mills tried last time to convince the consumers a price rise of JPY 5,000 per tonne for the Q2 (April to June) in vain and had to finally agree to a roll over at JPY 125,000 per tonne, delivered, as an average of all the Q2 agreed prices. Therefore, the sellers think this time they can expect that the price for Q3 be rolled over even under such circumstances as the offer prices from China are in a slightly down trend reflecting the increasing stocks in China despite curtailment, and the Q3 price for EF mills are under pressure. The offer prices of ferrosilicon through official routes have been in the range of USD 1,400 to USD 1,420 per tonne CIF, but it is not certain whether the level will be maintained or the price simply dips below USD 1,400 per tonne.
Market is concerned also about benchmark negotiations for the Q3 (July to September) deliveries of South African charge chrome. A producer from South Africa who recently visited Japan said on June 15th 2012 that it was too early to make comments on the status of the negotiation. It is said that South African producers are aiming at another rise for the Q3, which may be however a bit unlikely given the declining demand in Europe and production cut for summer vacation. Although the ESKOM's power buyback agreements expired end May 2012, the producers are not very much ready to resume normal scale operations by paying substantial extra for power costs during winter (June to August) in South Africa, and may rather continue curtailment. In general, curtailment of a product helps its price to go up but it does not seem the case this time with charge chrome as its demand in Europe, the biggest consumer for the South African charge chrome, has been steadily declining and will stay low during summertime.
No offers for the Q3 of low carbon ferrochrome seem to have been presented yet to the customers in Japan. Since the price in Europe has been stably at more or less USD 2.20 per pound without any signs of quick change, an agent of one of the major suppliers says, there is very little possibility of drop in the Q3 price for Japanese customers.
The price quoted by dealers of molybdenum oxide has been in a slow decline and is currently USD 13.30 to USD 13.50 per pound, meaning that the dealers have been trying to reduce inventory before the holiday season comes when demand shrinks. The trend may direct the price closer to USD 12.70 per pound as recorded early November 2011. An executive from CODELCO, a Chilean mining giant mentioned in a conference held recently that the price for molybdenum in 2012 would be in a range of USD 14 to USD 16 per pound. This means he expects a good price rise during the second half of the year.
Source - TEX Report Limited
(www.steelguru.com)
