NEW YORK A crackdown on ferrosilicon smuggling across the China-Vietnam border could lead to a rise in domestic prices, sources say.
"I hear theyre cracking down big-time right now. Some of the big producers like Erdos (Xijin Kuangye Co. Ltd.) have gone to the government saying Weve got to do something about this. The talk is that therell be no more material until mid-May," one supplier said, adding that he had already seen an uptick in sales on the news.
A trader echoed the sentiment. "The borders shut," he said. "You cant get anything from Vietnam at the moment."
Erdos couldnt be reached for comment.
The crackdown comes after a March influx of the material led to softer domestic prices (AMM, April 9). The material was allegedly smuggled to Vietnam from China to avoid a 25-percent export duty. Some was then sold to the United States.
Prices have since recovered to a range of 93 to 95 cents per pound from 90 to 95 cents previously, as most of the smuggled material has now been sold. Prices could rise further if the border remains closed, sources said.
Vietnamese ferrosilicon represents savings of about 4.5 cents per pound compared with regularly imported Chinese material, which would cost around 94.5 cents per pound to get into a domestic warehouse at export prices around $1,400 per tonne, sources said.
These are also poised to rise as export tags climbed to between $1,400 and $1,420 per tonne f.o.b. main Chinese ports Friday from $1,380 to $1,400 per tonne previously, according to AMM sister publication Metal Bulletin.
However, some were skeptical of the crackdowns effectiveness.
"I hear that the border is very poor," a second trader said, adding that this would make complete control over illegal exports very difficult.
Erdos, based in Inner Mongolia, is Chinas largest ferrosilicon producer and has the capacity to produce more than 1 million tons of ferroalloy products annually, according to its website.