Ferrosilicon, an important iron alloy, is widely used in the steelmaking industry as a deoxidizer and alloying agent, in the casting industry as an inoculant and spheroidizing agent, in the production of iron alloys as a reducing agent, and in other fields such as magnesium metal production and welding rod manufacturing. Its production involves raw materials including coke, steel scraps, quartz (or silicite), which are smelted using electric furnaces. Various factors, including electricity costs, raw material prices, supply-demand relationships, and policy factors influence the price of ferrosilicon.
In 2023, the ferrosilicon market faced a tough period, encountering price drops, supply-demand imbalances, and compressed profit margins. Entering 2024, despite some uncertainties, with the input of new capacities and potential demand recovery, the market is expected to gradually adjust and find a new equilibrium. Enterprises need to closely monitor market trends, flexibly adjust strategies, while government support will also help the industry navigate through difficulties, achieving healthy and sustainable development.
I. Overview and Industry Review of the Ferrosilicon Market in 2023
The ferrosilicon market in 2023 was marked by a sustained price decline and reduced volatility, reflecting sluggish domestic and international economic growth and weak demand. According to data from Iron Alloy Online, the annual average prices for 72# and 75# ferrosilicon fell by 14.61% and 15.37%, respectively, settling at RMB 7,130/ton and RMB 7,608/ton. This trend not only indicated pessimistic market expectations about economic prospects but also exposed underlying issues within the supply-demand dynamics of the ferrosilicon market.
Throughout the year, the trajectory of the market can be divided into three phases: From the beginning of the year to July, amidst post-pandemic economic recovery falling short of expectations and high inventory levels, ferrosilicon prices continuously declined; from August to September, driven by speculation over energy consumption policies and rising raw material costs, there was a brief rebound in prices; from October to year-end, with decreasing raw material costs and increased production, the supply-demand imbalance resurfaced, leading to fluctuating declines in prices. Additionally, key raw materials like blue carbon (lanthan) and iron oxide scale experienced significant volatility, contributing to a downward shift in the cost center for ferrosilicon production and further compressing profit margins.
II. Analysis of Supply and Demand Structure in the Ferrosilicon Market in 2023
On the supply side, the output of ferrosilicon decreased by 6.35% to 5.54 million tons in 2023, mainly due to reduced profit margins and lower operating rates. However, the gradual commissioning of new capacities in the second half of the year led to an increase in operating rates. Notably, imports of ferrosilicon rose by 44.29% to 55,872 tons, indicating changes in the domestic market's supply structure.
In terms of demand, despite a 1.5% increase in crude steel production, demand for ferrosilicon from magnesium metal and exports saw different degrees of decline. Especially in export markets, weakened overseas demand and intensified international competition caused ferrosilicon export volumes to drop significantly by 41.9%. The imbalance between supply and demand became one of the critical factors affecting market prices.
III. Trends and Outlook for the Ferrosilicon Market in 2024
Looking ahead to 2024, the ferrosilicon market is expected to encounter new challenges and opportunities. First, on the supply front, with the release of new capacities in Inner Mongolia and Gansu, ferrosilicon output is likely to see a modest increase, contingent upon changes in market demand. Second, regarding costs, considering the relative stability of electricity and raw material prices, the cost center for ferrosilicon is anticipated to remain largely unchanged.
For demand forecasts, while crude steel production may slightly decrease, the resumption of operations in the magnesium industry could lead to a minor uptick in demand for ferrosilicon. However, given the complex and volatile global economic situation, there is unlikely to be a significant improvement in ferrosilicon exports. Considering all these factors, ferrosilicon prices are expected to fluctuate between RMB 6,000 and 7,500 per ton in 2024, with specific trends closely tied to macroeconomic conditions and industrial policy developments.
In summary, the ferrosilicon market in 2024 will continue its adjustment phase. Companies should enhance risk management and optimize production layouts to cope with uncertain market environments. Meanwhile, relevant government departments should introduce more supportive measures to promote the healthy development of the industry.