NEW YORK Felman Production LLCs return to silicomanganese production will prompt a reduction in imports and intertrade purchases, but not necessarily a drop in spot prices, according to market participants.
Felman will fully resume production by restarting both furnaces at its New Haven, W.Va., plant by the end of July after reaching an electricity supply agreement with Appalachian Power Co. (APCo) (amm.com, July 1).
Felman has already restarted one furnace at the New Haven plant, though it may take some time for it to get up to speed, a company spokesman told AMM.
The company has been forced to rely more on imports to service the U.S. silicomanganese market following the idling of the New Haven plant in June 2013 (amm.com, June 28, 2013). Felmans Miami-based parent company, Georgian American Alloys Inc. (GAA), announced recently that it would reduce silicomanganese production at its Georgian Manganese LLC subsidiary in Zestafoni, Georgiawhich is described as "a leading producer and exporter of silicomanganese to the United States"by 2,500 tonnes per month (amm.com, June 18).
Georgia has been one of the leading sources of U.S. silicomanganese imports so far in 2014, shipping 46,656 tonnes between February and April alone, according to data from the U.S. Commerce Department and the U.S. International Trade Commission.
A reduction in such imports as well as intertrade buying likely will be the biggest changes prompted by Felmans return to production, market participants told AMM.
"Primarily they will immediately reduce what they have been buying in the market and secondly they will reduce their imports," one trader said. "They have bought a lot of material from the trade; we are aware of over 40,000 tonnes of silicomanganese that they purchased in the market in the last nine months."
"Perhaps with them starting up, it could have a temporary psychological effect on prices, although probably nothing significant or long lasting," a second trader said. "I believe prices are already bumping along the bottom, which is why Felman stopped producing in the first place. The concessions made by the state and power company just allows Felman to get back to work under current market conditions."
The market has been divided for months as to whether Felmans return would prompt a drop in spot prices or have little impact (amm.com, April 4).
Silicomanganese is currently trading in a range of 57 to 59 cents per pound, according to AMMs most recent assessment. It had been trading as low as 49 to 51 cents per pound shortly after the New Haven idling.
Meanwhile, documents filed with the West Virginia Public Service Commission on the agreement between Felman and APCo show that Felman and GAA may be forced to repay APCo up to $14 million in electricity discounts if the New Haven plant closes before July 1, 2019.