Due to the recent economic slowdown in the European economy, market demand has been affected and markets all over the world have been depressed. This is true, especially in China, the reason behind lower demand for steel. Although the Indian economy has a strong base, our growth has also been affected due to the global slowdown.
Prices of all ferro-alloys have maintained downward trend since a couple of months against previous gains reflecting continuous soft demand from steelmakers, rebuilding of depleted inventories and the supply-side concerns following both planned and unplanned outages. Prices are going soft on daily basis for Silico Manganese and Ferro Manganese. But Ferro Chrome and Ferro Silicon prices are increasing due to a rise in input cost of production. Prices are at the bottom levels for Ferro Alloy, below the costing price. Manganese Alloys producers are under tremendous pressure reflecting the magnitude of supply concerns in the context of demand recovery from steelmakers against higher input cost due to the recent increase of power tariff in various states.
The current market scenario is expected to remain soft for some time, reflecting lower demand, however, there is light at the end of
the tunnel. The estimated production capacity of all bulk Ferro Alloys in the country during the last fiscal was about 5.15 million tons including Manganese Alloys, Chrome Alloys, Ferro Silicon and Noble Alloys. The estimated production capacity of Manganese Alloys is around 3.50 mtpa and Chrome Alloys production capacity is 2.0 mtpa while that for Ferro Silicon is 0.25 mtpa against domestic demand of 3.50 mt. Hence the rest of the produced quantity is being exported making the industry dependent more on the export market.
On analyzing the domestic demand and capacity it is seen that the domestic demand increases about 17 to 18 percent every year while capacities increase by about 30-32 percent every year despite higher power tariff and shortage of raw materials including Manganese ore and Chrome ore.
Ferro alloys industry is a very power-intensive sector, and the power cost is about 35-40 percent of its total production cost. The balance is attributable to the cost of ore and other ingredients required. The power tariff in India is 3-4 times higher in comparison with the competing countries.
Let’s look at the power costs in different states.
In Andhra Pradesh, Discom power tariff is `7.52 per unit. There is news that Andhra Govt. have subsidies the Power tariff by Rs 1.30 Paisa per unit.
In West Bengal, DVC’s tariff is about `6.00 per unit.
In Chhattisgarh, tariff is about `6.20 per unit after rebate of 1 rupee while tariff and at Jindal park at Raigarh is Rs. 5.98 paisa per unit.
In Madhya Pradesh, tariff is around `6.00 per unit. The average national power tariff is above `7.50.
Hence, globally, Ferro alloys plants are situated geographically where the power tariffs are at moderate rates. The major raw materials required to produce Ferro Alloys are Manganese ore for Manganese Alloys and Chrome Ore for Ferro chrome, along with coke, quartz and fluxes, etc.
As for Manganese Ore, India has limited resources. Due to huge demand, there is scarcity EXPERT SPEAK of good quality ore and the entire domestic requirements of raw materials can’t be fully met by the domestic market. Hence the industry is depending on imports.
MOIL Ltd, is currently accounting for 25 percent production of India’s total production and the company has produced about 1.71 million tons of ore during last fiscal year while the balance quantity has been produced by private mine owners. Total production is around 2.40 million tons against domestic demand of about 5.8 mtpa. There is a huge gap between demand and supply.
Hence, the industry started importing ore since 2005 and continuously increasing the imports every year. Coke is most widely used as a reducing agent in Ferro alloys production. Coke and coal of Indian origin suffer from high ash and volatile matter content. Due to non-availability of low ash and low phosphorous metallurgical coke indigenously, the industry depends on imports from China and Australia. The logistics cost for transportation of raw materials or exporting of finished goods is a major concern.
Producers of Andhra Pradesh and West Bengal are at an advantage while producers in Madhya Pradesh, Maharashtra, Chhattisgarh, Orissa, Jharkhand for importing and exporting of goods are at a disadvantageous position.
At the present scenario, Manganese Alloys market is lackluster amid softened demand. Production of Ferro Alloys is not lucrative at this juncture due to the high cost of production and lowest selling price. So, the producers have cut down on production and operating furnaces are running below capacity.
The price factor of alloys and ores plays a vital role in this business. The price of Ferro alloys is decided by the international market
and foreign exchange rates, and it varies widely. In a highly volatile market condition, several factors are affecting the prices of
In such a difficult market scenario, several clusters for Manganese alloys have come up in West Bengal, Andhra Pradesh, Chhattisgarh, Orissa and Jharkhand, giving tough competition at a critical time. The sector will find it difficult to sustain under such challenging conditions.
Prices of Ferro Alloys The Indian producers are quoting/ trading export price for 65-15 percent grade SiMn at about $880-890 on FoB basis but the buyers are not accepting the higher price till this time. As for 60-14 percent grade SiMn material, the price are quoting/trading at $780-790 on FoB. basis. In the domestic market for 60-14 percent grade Silicon Manganese HC, Indian producers are quoting `63,500-64,000 per ton ex-plant basis at Raipur, Vishakhapatnam and Durgapur in the spot market.
But at this juncture, there is little scope to increase the prices further subject to demand and supply dynamics.
Ferro Manganese High Carbon For Mn 70 percent Grade ferro manganese HC, producers are quoting in the domestic market and trading 64,500-65,000 per ton ex plant basis at Raipur, Vishakhapatnam and Durgapur. Export price is ruling at $780-790 $ on FoB basis while in the export market, Ferro Manganese 75 percent grade is quoting at $825-830$ on FoB basis.
Ferro Chrome High Carbon After months of relative pricing stability, chrome prices have already spiked in recent weeks due of shortage of Chromite ore. Current prices are ruling at Rs -1,07,000/ton ex Odisha on pro-rata basis. Ferro Silico current Prices for 70 percent
grade is ruling at about Rs.1,03,000/ ton ex-Bhutan.I think market would be stable in future, hence Indian material to be costly for foreign buyers in comparison with the international buyer. The domestic prices of Manganese Alloys wait & watch situation for the market due surplus production in the country.
Manganese ore There was an expectation among market participants that MOIL would increase prices to maintain international price parity. But MOIL Ltd has increased the prices of Manganese ore effective from November 1 by 2% percent in Ferro grade while SiMn
Grade decreased by 4% percent for the month of October. Prices of imported Manganese to India for Hi-grade Ore is around $4.32 DMTU. Carbonated ore is about 3.57 DMTU for delivery for November onwards for December shipment and ore inventories at the main Chinese port is down by 0.3 percent.
The domestic prices of all Ferro Alloys are likely to remain strong as producers have already made forward booking orders in the domestic as well as in the export markets. Suppliers of Indian silicon-manganese are focusing on trade in the domestic as well
as with other export countries in southeast Asia, Middle East and Europe etc.
Indian producers are producing Alloys at full capacity at almost all the units. Due to present viability in the production of Manganese Alloy, there is surplus capacity in comparison with demand in India in Chhattisgarh, West Bengal, Andhra Pradesh and Odissa cluster.
Suppliers of Indian Silicon Manganese are focusing on trade in the domestic as well as with other export countries in Southeast Asia. In my view, the Manganese Alloys Market would remain volatile during the coming days.
Challenges of the market
♦ High energy cost – Energy costs constitute around 25 percent of total production cost of these alloys owing to high power requirements thus making it economically unfavorable compared with substitutes available. This may hamper sales volume xperienced by manufacturers operating within this space over the coming years.
♦ Volatility in raw material prices – Prices associated with key raw materials used for production process tend to fluctuate significantly depending upon global economic scenario. This has an impact on the final price charged by companies operating within this space thereby affecting their profitability margins.
The author is a ferro alloy industry expert based out of Raipur. He can be reached at email@example.com
Note: The views expressed here are those of the author and not of Steel Insights. The publication does not take any responsibility for the article in part or in full.
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