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Erdos cuts ferrosilicon output on weak market conditions

Keywords: Tags  Erdos, EMG, ferrosilicon, Inner Mongolia

SHANGHAI, China — Around 15 percent of ferrosilicon production capacity at China’s biggest producer has been closed this month, and more output may be cut in September due to the weak market environment.

"All of these furnaces were shut early this month and are undergoing maintenance now. So far, we have not set a restart date. It will depend on the market," an official from Erdos Metallurgy Group (EMG) told AMM sister publication Metal Bulletin. About 9,000 tonnes of ferrosilicon production will be lost every month during the shutdown, he added.

A source close to the company said EMG was planning to cut another 30 percent of capacity next month, but company officials refused to comment.

Chinese ferrosilicon prices dropped to 5,900 to 6,000 yuan ($928 to $944) per tonne Tuesday, down 50 yuan ($8) from last Friday to the lowest level since 2010. The f.o.b. market remained quiet, with prices unchanged in a range of $1,350 to $1,370 per tonne.

Most small and medium-sized ferrosilicon businesses have already ceased production due to the relentless decline in prices over the past year or so, industry sources said.

"Major producers have started to cut production in response to the simple economic facts," said a source at an Inner Mongolia producer, which has already shut down more than half of its furnaces and has almost suspended its export business on low prices and demand. "We still receive some bids from our old customers, but the bids are too low to accept," she added.

Other big producers in major production hubs like Gansu, Qinghai and Ningxia also have trimmed output to reduce losses, according to sources.

Following the cuts by mainstream producers, China’s ferrosilicon production dropped to 394,512 tonnes last month, down 12 percent from June although still 2.5 percent higher than a year earlier.

Some market participants believe that the reduced supply could prop up prices in the fourth quarter. "I feel that prices could stop falling in the fourth quarter, but it’s still hard to say when they could rally," a smelter source in Ningxia said.

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