Japanese traders, currently in negotiations with steelmakers for first-quarter ferroalloy supply contracts, said Wednesday they have warned customers of ferrosilicon shortage following output cuts in China.
Japanese mill sources said they could buy Malaysian and Russian supplies, while the traders said this was unlikely as non-Chinese volumes were limited. Producers in China's Ningxia autonomous region were forced to suspend production this week following power cuts by the government as part of environmental measures, sources said.
Several Japanese traders said some Chinese producers were no longer offering, while offers from Chinese traders and other Chinese producers skyrocketed to $2,000-$2,300/mt CIF Japan, for January loading from Tianjin.
Spot prices last week were assessed at $1,440-$1,470/mt CIF Japan, S&P Global Platts data showed.
"There are offers, but offers without a guarantee of cargo," said one Japanese trader who was offered $2,000/mt CIF Japan.
"The numbers are crazy. I heard $2,300/mt CIF," said another Japanese trader.
Some electric arc furnace steelmakers have issued buy tenders seeking supply for January or January-March this week.
The first trader said the mills asked tender participants whether they had stocks in Japan, or were planning to import.
"If you say you have stocks, the mills say we want them all, bring them right away," he said.
The mills typically seek several hundred tons per month.
One mill, who planned to issue a buy tender for January next week, said a possible shortage had not crossed his mind.
"There is a time lag. Japanese stock prices are rising but gradually, slower in pace compared to Chinese prices, as stocks were purchased months before when Chinese export prices were lower. This week, I have heard Yen 170/kg ($1,504/mt) delivered or less, which is still $100/mt higher than a month ago, but lower than this year's high of Yen 180-190/kg. The steelmakers are relaxed because they think there are still stocks available," a second Japanese trader said.
"We can buy from Russia, Malaysia," the mill source said.
"The mills do not realize non-Chinese supplies are limited," the Japanese trader said.
A second Japanese electric arc furnace steelmaker source said his supplies are under long-term contracts, and has stocks equivalent to three months' consumption.
"The bigger mills with contracts are protected, but the smaller spot buyers will be forced to switch to silicomanganese and ferromanganese to replace ferrosilicon," the first Japanese trader said.
This week, mills are pursuing the possibility to secure as much ferrosilicon stocks, and if supplies are insufficient, they will switch to manganese alloys.
The mills are reluctant to do the switch as they have been using ferrosilicon for over a decade.
"In theory, substitution is possible, but there is strong hesitation because we have not done it for a decade," said the first mill source.
Spot silicomanganese prices were at $1,120-$1,130/mt CIF Japan this week, unchanged from a week ago, sources said.
"From next week onward, when more mills switch to manganese alloys, prices will start to rise," the first trader said.
