Electricity curbs may boost China SiMn prices

Chinese silico-manganese alloy prices may rise in the near term following production cuts during power supply restrictions in northern China's Inner Mongolia.

Alloy producers, particularly in Ulanqab city in the Inner Mongolia autonomous region, have reduced operating rates by around 20pc since late last week because of industrial electricity restrictions in the summer peak season. It is unclear when the power shortages will end.

Major producers in Inner Mongolia have focused on fulfilling orders with steelmakers for July delivery at 7,850-7,900 yuan/t ($1,141-1,148/t) basis delivered and paid by acceptance bill for 65/17 grade material. Spot offers are at Yn7,500-7,600/t ex-works today in Inner Mongolia.

Several producers are reluctant to sell as they expect prices to move higher in light of the fall in alloy output. And some trading companies are reluctant to purchase given lower ore prices at China's main ports.

Inner Mongolia is the largest producing area for silico-manganese alloy in China. China produced about 9.5mn t of the alloy in 2018, including 3.3mn t from Inner Mongolia that accounted for nearly 35pc of the country's total production.

China produced 5.5mn t of the alloy in the first half of 2019, up by 30pc from the same period last year. Output in Inner Mongolia rose by 36pc to 1.9mn t in January-June, as new technology standards in the reinforcement steel bar sector have increased consumption of the alloy since November last year.

Production of 1t of silico-manganese alloy typically consumes 4,000kWh of electricity, 2.4t of manganese ore and 0.55t of coke. Manganese ore accounts for about 60pc of the total production costs, with electricity at 20-25pc and coke at 10-15pc.

Silico-manganese alloy is widely used as a deoxidizer in steel production. Argus assessed prices for silico-manganese 65/17 grade alloy at Yn7,450-7,650/t on 16 July, up from Yn7,100-7,300/t around a month earlier on 18 June, on tight spot supply and higher ore costs.