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PrintFerrosilicon prices are expected to fall below $1 per pound for the first time since late September of last year as competition for business has heated up and replacement costs out of China have fallen, market participants said.
"My next quote is going to be at 99 and a half cents (per pound)," one trader said, adding that he had recently missed business at $1.01 per pound and was therefore dropping his price.
As a result of increased competition and spotty demand, domestic prices have narrowed to between $1 and $1.02 per pound from between $1 and $1.05 per pound previously, although no sales have been reported at less than $1 per pound yet.
The first trader said part of the reason he was lowering his offer price was that replacement costs for ferrosilicon out of China have fallen to below $1,500 per tonne, which equates to 68 cents per pound, from between $1,510 and $1,550 per tonne (68.5 to 70 cents per pound) previously, making it profitable to sell material at lower levels.
This comes even as ferroalloy production in China had fallen in August due to a crackdown on power consumption.
"There’s just no demand in the export market in China," said a second trader, explaining the drop in prices even as production was falling.
Exports from China to the United States fell to 4,279 tonnes in July from 6,480 tonnes in June, according to figures from the U.S. Census Bureau. August data have not yet been published.
In August, market participants still hoped that export prices from China would not weaken much below $1,500 per tonne as they saw that price level reflecting the production cost of the material. That hope hasn’t played out, leading some traders to liquidate inventory in anticipation of a further drop in prices.
"We took business at a dollar in warehouse just to move product and get some cash in the door," a third trader said.
It also comes as end-user demand has slowed over the summer and has been further hit by recent macroeconomic volatility. "There’s so much uncertainty about the economic direction, nobody wants to get caught with inventory," the third trader said.
As a result, all available business was being vigorously sought after by competition.
"It’s absolutely brutal," a fourth trader said, adding that for him replacement costs had not fallen. "I can’t figure the ferrosilicon market out at the moment. I can only sell at $1.01 and $1.02 per pound, but I can only buy material at $1.03 and $1.04 per pound."
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