Ferroalloy is an important raw material of iron and steel industry, which is widely used in steel, casting, chemical industry, electric power and other fields. According to different additive elements, ferroalloy can be divided into ferrosilicon, manganese silicon, ferrochrome, silicon metal, ferronickel, ferromolybdenum and other types.
As an indispensable raw material for steelmaking and casting industry, the ferroalloy price and use of ferroalloy has always been a hot topic in the market. For beginners in the industry or those who want to use ferroalloys to make money, they need to always pay attention to the market trend of ferroalloys, below we analyze the changes of the ferroalloy market in 2023 from all aspects and the future development prospects.
First of all, let’s talk specifically, what is ferroalloy? Ferroalloy refers to iron as the main component, adding one or more other elements, by smelting or mechanical processing of the alloy; In a broad sense, the ferroalloy refers to all intermediate alloys used in steelmaking in the iron and steel industry (whether containing iron or not, such as silicon manganese alloy, silicon chromium alloy) and metal and compound additives used in steelmaking (such as metal manganese, metal chromium, metal nickel, molybdenum oxide, etc.).
What are the main applications of ferroalloys? More than 90% of iron alloys are directly used in steelmaking, and less than 10% of the share is used in cast iron, nonferrous metal smelting and chemical industry, nonferrous metal alloys and other fields. Compared with the main metallurgical raw materials such as iron ore and coke, the consumption of ferroalloy in iron and steel smelting is much smaller, but the role is indispensable. The main uses of ferroalloy in the iron and steel industry include two aspects: 1) deoxidizing desulfurizer in the steelmaking process; 2) Alloy additives, the main role is to improve the performance of steel grades.
Before discussing the global market of ferroalloys, let’s first understand the market distribution of ferroalloys. At present, China is the world’s largest ferroalloy market, accounting for about 40% of the market share, followed by the United States and the Middle East market, accounting for about 15% of the market. Therefore, based on the Chinese market, we will analyze the market operation status of China’s ferroalloy industry in 2023 from the aspects of supply and demand, price, cost, export, etc., and look forward to its future development trend.
Supply and demand of ferroalloy
According to the “China Ferroalloy Industry Market Research Report (2023 edition)” released by Zhiyan Consulting, in the first half of 2023, affected by the epidemic at home and abroad, the growth of steel demand slowed down, and the procurement rhythm of steel mills was adjusted, resulting in a relatively low demand for ferroalloy. At the same time, affected by the dual-control policy of energy consumption, power rationing or power failure occurred in some areas, affecting the production of ferroalloy. Therefore, in the first half of 2023, China’s ferroalloy production decreased slightly year-on-year, but it is still at a high level.
Specifically, in the first half of 2023, China’s ferrosilicon production was about 2.3 million tons, down 8.7% year on year; Manganese silicon production was about 4.5 million tons, an increase of 10.8%; Silicon-manganese production was approximately 3.8 million tons, an increase of 5.6%. Ferrochrome production was approximately 1.1 million tons, down 2.7% year-on-year; Nickel-iron production was approximately 400,000 tons, an increase of 20%. Ferric molybdenum production was approximately 20,000 tons, an increase of 10% year-on-year. It can be seen from the output changes of various ferroalloys that mangano-silicon, silico-manganese, ferro nickel and ferro molybdenum and other varieties perform better, mainly benefiting from their higher production profits and export demand; The poor performance of ferrosilicon and ferrochrome and other varieties is mainly subject to their lower production profits and environmental pressure.
From the perspective of regional distribution, in the first half of 2023, China’s main ferroalloy production areas are still concentrated in Inner Mongolia, Ningxia, Xinjiang, Sichuan, Yunnan and other places. Among them, Inner Mongolia is China’s largest ferrosilicon production base, accounting for nearly 40% of the country’s ferrosilicon production; Ningxia is the largest manganese silicon production base in China, accounting for nearly 30% of national manganese silicon production. Xinjiang is the largest nickel-iron production base in China, accounting for nearly 60% of national nickel-iron production. Sichuan is the largest silicon manganese production base in China, accounting for nearly 40% of the national silicon manganese production. Yunnan is the largest ferrochrome production base in China, accounting for nearly 50% of the country’s ferrochrome production. The advantages of ferroalloy production in these areas are mainly due to their rich mineral resources, low power costs and good geographical location.
Looking forward to the second half of 2023, with the improvement of the epidemic prevention and control situation at home and abroad, steel demand is expected to gradually pick up, especially the demand for steel in infrastructure, automobiles, machinery and other fields is expected to grow. This will drive the increase in demand for ferroalloys, especially iron alloys for iron and steel such as ferrosilicon and manganese silicon. At the same time, with the promotion of the national “double carbon” goal, the steel industry will accelerate the low-carbon transformation, improve the quality and added value of steel, which will promote the demand for high-quality ferroalloys, especially the demand for special ferroalloys such as silicon manganese, nickel iron, and ferro molybdenum. In addition, with the recovery of the international market, China’s ferroalloy exports are also expected to continue to grow, especially for exports to Europe, Southeast Asia and other regions.
From the supply side, in the second half of 2023, China’s ferroalloy production is expected to continue to maintain stable growth, but the growth rate will slow down. On the one hand, affected by the dual-control policy of energy consumption, some areas will still face the risk of power rationing or blackouts, especially in the winter peak season. This will cause certain constraints on ferroalloy production, especially for high energy consumption, high emissions of ferroalloy production enterprises. On the other hand, due to the impact of rising costs and falling prices, the production profits of some ferroalloy production enterprises will decline, or even incur losses. This will lead to some ferroalloy production enterprises to reduce or stop production, especially for small and medium-sized, low-end, inefficient ferroalloy production enterprises. Therefore, in the second half of 2023, China’s ferroalloy supply side will show a trend of structural optimization and increased concentration.
In summary, in the second half of 2023, both ends of China’s ferroalloy supply and demand are expected to achieve stable growth, but the growth rate will slow down. From the perspective of supply and demand balance, it is expected that in the second half of 2023, China’s ferroalloy market as a whole will show a relatively balanced or slightly tight state. However, due to the differences between different varieties and regions, some varieties and regions may be in short supply or oversupply situation. Therefore, in the operation of the market, it is necessary to pay attention to the price differences and liquidity differences between various types of ferroalloys and between various regions.
Ferroalloy price
According to the “Ferroalloy 2023 Annual Report: Capacity replacement story will come to an end, optimistic expectations are difficult to come to reality” released by Minmetals futures, in the first half of 2023, China’s manganese silicon and ferrosilicon prices showed a downward trend. It is mainly affected by the following aspects:
- Weak steel demand. Affected by the weakening of the real estate industry and the macroeconomic slowdown, the growth of steel demand has slowed down significantly, and the procurement rhythm of steel mills has been adjusted, resulting in relatively low demand for ferroalloy. According to the data released by the China Iron and Steel Association, in the first half of 2023, China’s crude steel production was 620 million tons, an increase of 3.2%, and the growth rate was significantly lower than the 12.7% in the same period in 2022. Steel consumption was 580 million tons, up 2.8% year-on-year, and the growth rate was also down from 9.6% in the same period in 2022.
- Oversupply of ferroalloys. Affected by the dual-control policy of energy consumption, power rationing or power outage occurred in some areas, affecting the production of ferroalloy. However, due to the faster capacity replacement progress of ferroalloy production enterprises, and the relatively sufficient power supply in some areas, the ferroalloy supply side still maintains a high level. According to data released by the National Bureau of Statistics, in the first half of 2023, China’s ferrosilicon production was 2.3 million tons, down 8.7% year on year; Manganese silicon production was 4.5 million tons, an increase of 10.8%. From the variety point of view, the supply of manganese silicon is obviously excessive, while the supply of iron silicon is relatively balanced.
- Rising prices of raw materials. Affected by international market demand and exchange rate fluctuations, the price of ferroalloy raw materials showed an upward trend in the first half of 2023. According to data released by Minmetals futures, in the first half of 2023, domestic and foreign manganese ore prices rose by 15% and 20%, domestic and foreign silicon metal prices rose by 10% and 12%, and domestic and foreign chromium ore prices rose by 8% and 10%, respectively. The rise of raw material prices leads to the increase of ferroalloy production costs, which compresses ferroalloy production profits.
Combined with the above factors, in the first half of 2023, the prices of manganese silicon and ferrosilicon in China showed a downward trend. According to the data released by Minmetals futures, in the first half of 2023, the price of manganese silicon in China fell from 7800 yuan/ton in January to 6500 yuan/ton in June, a decline of 16.7%; The price of ferrosilicon in China fell from 7,000 yuan/ton in January to 6,200 yuan/ton in June, a drop of 11.4%.
Ferroalloy market analytics in 2024
Looking ahead to 2024, China’s manganese silicon and iron silicon prices are expected to rebound. It is mainly affected by the following aspects:
- Steel demand picks up. With the improvement of the epidemic prevention and control situation at home and abroad, steel demand is expected to gradually pick up, especially the demand for steel in infrastructure, automobiles, machinery and other fields is expected to grow. This will drive the increase in demand for ferroalloys, especially iron alloys for iron and steel such as ferrosilicon and manganese silicon.
- Shrinkage of ferroalloy supply. With the further implementation of the dual-control policy on energy consumption, some areas will still face the risk of power rationing or blackouts, especially in the winter peak season. This will cause certain constraints on ferroalloy production, especially for high energy consumption, high emissions of ferroalloy production enterprises. At the same time, due to the impact of rising costs and falling prices, the production profits of some ferroalloy production enterprises will decline, and even incur losses. This will lead to some ferroalloy production enterprises to reduce or stop production, especially for small and medium-sized, low-end, inefficient ferroalloy production enterprises.
- The price of raw materials is stable. With the stability of international market demand and exchange rate fluctuations, the price of ferroalloy raw materials is expected to remain relatively stable in the second half of 2023. According to the forecast released by Minmetals futures, in the second half of 2023, the price of manganese ore at home and abroad will be maintained at 800 yuan/ton and 1000 yuan/ton respectively, the price of silicon metal at home and abroad will be maintained at 7000 yuan/ton and 8000 yuan/ton respectively, and the price of chromium ore at home and abroad will be maintained at 4000 yuan/ton and 5000 yuan/ton respectively. The stability of raw material prices will be conducive to the control of ferroalloy production costs and increase the profit of ferroalloy production.
Market outlook of ferroalloy
The year 2023 is also an important moment for the development of the ferroalloy industry. From the past few years to the next few years, the development of ferroalloys will largely determine the benign development direction of global economic operation. In this regard, from the technical equipment, industry operation rules, market demand and other aspects of the analysis, one is to seize the new opportunity for the development of ferroalloy industry in the future, the second is to strengthen the judgment of the current industry market trend, so as to formulate a reasonable market strategy.
Technical equipment
In terms of technical equipment in the ferroalloy industry, first of all, it should be added that with the upgrading of technology and fierce market competition, enterprises are increasingly finding that efficient production technology and equipment is an important factor to achieve enterprise development. From the point of view of mature technology, sintering ferroalloy is very time-consuming and affects the integration of ferroalloy production. New technologies such as electronic melting technology and laser melting technology can not only improve the performance of ferroalloys, but also shorten the production cycle, effectively improving the productivity of ferroalloys.
In addition, the new technology will also improve the material properties of ferroalloys and their derivatives, improve the process flow, be more environmentally friendly, reduce costs more effectively, and also create a larger tolerance space for new ferroalloys to give full play to its greater application and value.
Second, the law of industry operation
From the perspective of the operation law of the ferroalloy industry, the ferroalloy industry will pay more attention to the production structure, management mechanism, technology promotion and innovation in 2023, improve the quality of enterprises, and enhance the competitiveness of characteristics and regionalization. First of all, it is necessary to upgrade the technical equipment of the ferroalloy industry to a higher level, and enhance the market competitiveness through technological innovation and continuous optimization of the production mechanism. Secondly, we should pay attention to the production management of enterprises, pay attention to the improvement of the “three” short board of enterprises, put quality management on the main direction of management, so as to ensure product quality, stabilize market demand, and increase the sustainable development of the industry; Thirdly, it is necessary to increase service investment, speed up service upgrading, and more comprehensively respond to the various needs of the market and customers.
Third, market demand
Market demand in 2023 is also an important frame of reference for the development of the ferroalloy industry. In recent years, with the construction of the “Belt and Road”, the implementation of new urban construction, the progress of new energy development and other national strategies, combined with local economic development, the ferroalloy industry is expected to obtain increasing market demand, which is conducive to seizing new opportunities in the market and improving market competitiveness. Among them, the increasing demand for ferroalloy in important basic industry construction, such as infrastructure construction, new energy development, intelligent manufacturing, aerospace manufacturing and other industries is also an important support for the growth of market demand.
In short, the development of the ferroalloy industry in 2023 will be deeply affected by factors such as technology and equipment, industry operation rules and market demand, and enterprises should pay attention to seizing the opportunities of the future market, deepening operation optimization, unimpeded characteristic industrial space, and increase service investment, actively respond to the current market demand, and win the new market with advantages in the future
