NEW YORK Silicomanganese market participants say Felman Production LLCs decision to idle one of its furnaces could tighten up supply enough for prices to increase, with all eyes focusing on the outcome of a reported tender from steelmaker Nucor Corp.
Felman Production said that it will start planned maintenance work one furnace at a time on each of the three furnaces at its New Haven, W.Va., plant until September, at which point it will leave one furnace idle if economic conditions have not improved (amm.com, May 20).
The company attributed the move to "the decline in silicomanganese prices over the past several months combined with rising manufacturing costs, such as electricity."
Silicomanganese traders said the idling could tighten up supply to the extent that prices are pushed higher. The material is currently trading in a range of 53 to 57 cents per pound, having dropped steadily from a range of 73 to 79 cents in March 2012.
"This could be a good catalyst to see prices start moving positively," one trader said. "Felman is widely recognized as the leader in terms of market share, so the fact they cut back a furnace sends a pretty strong message. It tells me that they really are suffering on costs, which is what weve been saying for months about prices not being sustainable at these levels.
"After being the market leader in volume, now theyre showing leadership in constraint. It should tighten things up," he said. "Even if on the demand side it stays flat, the message is clear that prices need to move."
"It may be a bullish thing for the marketplace," a second trader said. "I think theres not a whole lot of volume there, so it may make things a bit tighter. So it could be a good thing."
Meanwhile, Charlotte, N.C.-based Nucor is reported to have submitted a "request for quote" seeking up to 3,300 tons of silicomanganese in the third quarter for its plants in Darlington, S.C., and Marion, Ohio, with results of the tender expected within days.
Sources told AMM that the tender has the potential to substantially influence free-market pricing for silicomanganese, much as a similar tender from Nucor did in March (amm.com, March 8).
"They could use that as an opportunity to test the market," the second trader said.
Sources told AMM that Nucor also has a tender in the market for ferrosilicon, although reports on the quantity have varied.
Nucor could not be reached for comment.