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Shuffling intensifies in ferroalloy industry

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It is difficult for iron and steel industry to recover

From January to August, China's steel exports increased 26.5% to 71.866 million tons year on year, while the national crude steel output decreased by 2% to 54.3 million tons year on year in the same period. The shrinkage of the domestic steel market is obvious. China's stainless steel industry, which has been highly anticipated, has been experiencing continuous reduction and shutdown of stainless steel enterprises since the beginning of the year. Some newly-built enterprises have been forced to postpone production. In the first half of 2015, the growth rate of crude stainless steel production has dropped from double digits to 6.6%. Organizations predict that the output of crude stainless steel in China will increase by only 2.5% to 22.15 million tons in 2015.

Global commodity trading giant Jianeng Costrata Co., Ltd. has experienced a sharp decline and shock in its share price, which means that global commodities such as iron ore have entered a period of price decline. From this point of view, the probability that the price of 150 carbon billets will fall below 1500 yuan/ton in the future is increasing sharply.

Increased contradiction between supply and demand of alloys

From January to August, the output of ferroalloys in China was 24.058 million tons, down 15.55% from the same period in 2014; the net import of ferroalloys in China was 1.651 million tons (import 23.87 million tons, export 73.6 million tons), up 96.5% from the net import of 840,000 tons (import 17.14 million tons, export 87.4 million tons) in the same period in 2014; and the domestic supply of ferroalloys was 25.71 million tons, up to 201.1 million tons. The same period of four years increased by 8.5%, which is in sharp contrast to the 2% decline in crude steel production in the first eight months of this year.

Under the policy of high tariff on the export of superior ferroalloys, the export volume of ferrosilicon in China was 1539,000 tons in 2007, only 313,000 tons in 2013, and only 188,000 tons in the eight months before 2015. From January to August 2015, the export volume of ferroalloys in China continued to decrease by 18.75% compared with the same period in 2014. It should be noted that imported ferroalloys are pouring in from abroad. From January to August, China imported 18.226 million tons of ferrochrome, an increase of 27.9% over the same period in 2014 and 69.1% over the same period in 2013; China imported 433,600 tons of ferronickel, an increase of 151.66% over the same period in 2014 and an increase of 375.44% over the same period in 2013.

Alloy prices accelerated their decline

Since the beginning of this year, all ferroalloy prices have continued to fall, most of which have fallen below the cost floor. Many ferroalloy enterprises have to insist on losing production in order to maintain market share. The price of high carbon ferrochrome introduced by Baosteel in October was 6,000 yuan/ton, 6.7% lower than 6,400 yuan in October 2014, 14.2% lower than 6,850 yuan in October 2013, 18.3% lower than 7,100 yuan in October 2012 and 37.5% lower than 8,250 yuan in October 2011. The price of silicon and manganese determined by Hebei Iron and Steel Group fell to 4900 yuan/ton in October, 97% lower than 9650 yuan/ton in October 2011, and about 5000 yuan/ton in October, about 72% lower than 8600 yuan/ton in November 2011. As the price of nickel on the London Metal Exchange (LME) fell from $58,000 to less than $10,000 per ton, the September high nickel iron price finalized by TISCO was only $740 per ton.

The market competition is more fierce

Since 2013, China's ferroalloy industry has begun the shuffling process. The transformation and upgrading of competition means, such as large-scale equipment and scientific environmental protection, also lost its competitive advantage in the price collapse in 2015. In 2013, the enthusiasm for incremental mining of chromium deposits was basically ended, and in 2014, the price advantage of abundant water and electricity in the South was completely ended. In 2015, the ambition of silicon and manganese production in the North was hit hard. In recent years, the output of ferrochromium in foreign countries has increased rapidly, while its producers complain about the low price in China market and compete for the market share in China. Obviously, the smelting opportunity of 12500 kVA submerged arc furnace in China has been greatly suppressed, and the production cost of 33000 kVA smelting furnace in China is relatively low.

China's ferronickel industry retreated from inland to coastal areas in 2012. After Indonesia completely banned the export of nickel ore in 2014, the advantages of rotary kiln-submerged furnace (RKEF) completely undermined the superior price confidence of Inner Mongolia Autonomous Region. With the popularization of "integration" process in stainless steel smelting, the predicament of single ferronickel enterprise is becoming more and more obvious. After the price of nickel sheet fell below the industry cost average of $15,000 per ton, the advantage of pure nickel was gradually highlighted. When nickel prices fall below the $10,000/ton threshold, it is difficult for low-grade nickel-iron ore smelted in the Philippines to show comparative advantages. Since the monthly import of 75,154 tons of ferronickel in April, the trend of import volume gradually declining shows that foreign ferronickel production has entered a difficult situation of loss, which adds unknown worries about investing in overseas ferronickel projects, thus slowing down the construction and production progress of overseas factories.

Industry shuffling intensifies

Industry insiders generally believe that even if the macro economy improves in the fourth quarter, it will not be able to drive the miracle growth of steel demand, especially the large-scale reversal of the demand for carbon steel.

Ferroalloy prices introduced before National Day are not too good news for most ferroalloy enterprises. Due to the difficult economic transformation and limited investment, the number of ferroalloy enterprises that can maintain production will decrease again. Because of the influx of foreign ferroalloys into China, it is difficult for domestic ferroalloys to export. It is estimated that after the Spring Festival 2016, ferroalloys enterprises will be able to maintain the watershed of production and operation. China's iron and steel scrap steel smelting era is approaching, China's ferroalloy industry shuffling in the future will be a major event for quite a long time.

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