Abstract  

The market atmosphere is pessimistic, futures prices continue to fall, and the short-term decline is difficult to reverse. In the near future, steel mills have taken the initiative to reduce production, and the future crude steel production reduction policy is expected, and the focus of long-term demand continues to move downward. Under the stimulation of high profits, the output of ferrosilicon is still at a high level; After the first phase of silicon manganese production cuts, there was a rapid production cut again, and there was hope for improvement in supply and demand fundamentals. Next week, the price of ferrosilicon is difficult to see a reversal, and the probability of weak operation is very large. The price of silicon manganese has fallen to near the rigid cost we predicted, and enterprises have responded to rapid production cuts, and we judge that the follow-up space may not be large.  

Strategy:  

Ferrosilicon suggests that radicals continue to hold short orders, conservatives take an appropriate amount of profits to close positions, and pay attention to cost support near 7900-8300 yuan / ton. The price of silicon manganese has fallen to near the first-line rigid cost of 7500 yuan / ton, and the company has rapidly reduced production to cope, and the subsequent decline space may not be large, it is recommended that the early short order can be profitable to close the position.  

Risk Warning:  

Electricity shortage in summer, silicon manganese production decreased significantly 

One 

Ferrosilicon: It is difficult to make a decision to reduce production with high profits, and the price will still be weak 

This week, the current price of ferrosilicon fell by about 300 yuan / ton synchronously, downstream steel mills purchased on demand, traders have more inventory without the willingness to hoard goods, and the spot trade market is still weak.  

This week, ferrosilicon profits have contracted, and the profits of the mainstream high-cost areas of Inner Mongolia, Ningxia and Gansu are about 500 yuan / ton, while the profits of low-cost Qinghai and Shaanxi are still above 1,000 yuan / ton. The damage caused by the decline in spot prices to the production profits of ferrosilicon enterprises is relatively limited, and the willingness of production enterprises to maintain high production is high. This week, the operating rate of ferrosilicon enterprises was 53.08%, down 1.13% from the previous period; The average daily output was 18,166 tons, down 240 tons from the previous period; Weekly production was 127,100 tons, down 1,680 tons from the previous week. Enterprise production is still at the highest level in recent years. This week, the Silicon Committee of the China Ferroalloy Industry Association held the second information exchange meeting of ferrosilicon manufacturers in 2022, and the meeting recommended that enterprises take appropriate measures to stop production and limit production in combination with their own actual conditions; In order to reduce production costs, the production mode of peak avoidance and peak shifting is adopted to organize production. From the current profit level, in the short term or will not see a wide range of production cuts, the supply side of ferrosilicon will remain at a high level.  

Upstream supply has not yet seen a significant weakening, but terminal demand has shown a clear inflection point. From the perspective of average daily crude steel production, the average daily crude steel production in mid-June fell by more than 60,000 tons from the end of May to 3.1 million tons/day; From the perspective of the average daily molten iron production, this week's molten iron production fell by more than 30,000 tons from last week to 2.3965 million tons / day. The profitability of steel mills tonnage of steel and the profitability ratio of steel mills in the country are declining, and more and more steel mills have announced production reduction plans, and it is estimated that the average molten iron production will fall to less than 2.35 million tons / day next Sunday. Before the terminal demand does not improve significantly, steel mills will still adopt a production reduction policy, and the demand for ferrosilicon will still move down.  

The supply side has not yet seen the active production reduction phenomenon of production enterprises, and the demand side has both emotions and future expectations of the double suppression, and the fundamental pressure of supply and demand of ferrosilicon is large. From the perspective of inventory, the inventory of ferrosilicon enterprises and steel mill inventories have shown signs of rising. The enterprise inventory is 50,000 tons, and the steel mill inventory can be used for 21 days. Steel mill inventory available days continue to rise, if the later steel mills independently reduce production, or even the policy to reduce production landing, steel mill inventory available days will further rise, then the demand pressure will be greater.  

The fundamentals of ferrosilicon supply and demand are still in a relaxed state, and it is difficult for ferrosilicon prices to improve significantly before the substantial production reduction in the upstream. It is expected that the probability of continuing to run weak next week is very large, it is recommended that the radical short orders continue to hold, the conservatives take an appropriate amount of profit to close the position, and pay attention to the cost support near 7500-7800 yuan / ton.  

Two 

Silicon manganese: enterprises cut production to cope, there is a hope for improvement in fundamentals  

This week, the spot price of silicon manganese fell by 100-200 yuan / ton, the futures price fell by 300 yuan / ton, and the plate discount expanded.  

This week, with the decline in the price of raw materials such as coke and manganese ore, the production cost of silicon and manganese enterprises in various places has moved down by 200-300 yuan / ton, and the cost decline is slightly greater than the decline in spot prices, resulting in an improvement in the loss of production enterprises. However, the actual production situation of enterprises has not improved, and most enterprises still lose money in production. At this stage, the production cost of most enterprises is at the first line of 8000 yuan / ton, the futures price is at the first line of 7700 yuan / ton, and the disk discount is about 600 yuan / ton.  

At present, silicon manganese companies have lost money for three consecutive weeks, and this week enterprises began to significantly reduce production. The operating rate of enterprises was 53.67%, down 7.72% from the previous period; The average daily output was 26015 tons, down 1985 tons from the previous period; Weekly production was 182,100 tons, down 14,500 tons from the previous week. Silicon manganese enterprises to reduce production is larger, according to the mid-June "silicon manganese second half of the market outlook" point of view, the annual crude steel production reduction of about 20 million tons, the weekly silicon manganese production remained at 180-187,000 tons, supply and demand fundamentals will be basically in a balanced state. After the sharp reduction in production of silicon manganese enterprises, there is hope for improvement in the fundamentals of supply and demand. Today's market rumors that the annual crude steel pressure reduction of 50 million tons, according to this estimate silicon manganese production still needs to be further reduced, but this news has not been confirmed, the follow-up production reduction still needs to be observed.  

This week's production cut is larger, but it will take some time to ease inventory pressure in order to significantly improve the fundamentals of supply and demand. In terms of inventory, the company's inventory was 109,000 tons, a small increase of more than 7,000 tons, the warehouse receipt inventory was 139,000 tons, maintaining a high level, and the steel mill inventory was available for 22 days, an increase of 1.3 days. There is inventory pressure in the upstream, while the willingness to replenish the warehouse downstream is not high.  

Silicon manganese enterprises began to significantly reduce production, and after the inventory pressure is fully released, the supply and demand fundamentals of silicon manganese are expected to improve substantially. Prior to this, the probability of silicon manganese prices remaining weak is large. Considering the downward shift in production costs, we believe that the rigid support of 7500 yuan / ton of first-line silicon manganese is larger. This week's intraday price is close to this target point, and it is expected that the downside of subsequent prices may be relatively small. It is recommended to treat cautiously in the near future, and the previous short orders can be closed profitably. If the steel mill or trader has a procurement demand, considering that the disk price has fallen significantly, it can participate in the point price.  

Three 

Conclusions and Recommendations 

The market atmosphere is pessimistic, futures prices continue to fall, and the short-term decline is difficult to reverse. In the near future, steel mills have taken the initiative to reduce production, and the future crude steel production reduction policy is expected, and the focus of long-term demand continues to move downward. Under the stimulation of high profits, the output of ferrosilicon is still at a high level; After the first phase of silicon manganese production cuts, there was a rapid production cut again, and there was hope for improvement in supply and demand fundamentals. Next week, the price of ferrosilicon is difficult to see a reversal, the probability of weak operation is very large, it is recommended that the radical short order continue to hold, the conservative profit to close half, pay attention to the cost support near 7500-7800 yuan / ton. The price of silicon manganese has fallen to near the rigid cost we predicted, and enterprises have responded to rapid production cuts, and we judge that the follow-up space may not be large. It is recommended that the silicon manganese position be cautiously held, and the previous short order can be closed profitably.