Ferrosilicon prices in the U.S. to weaken
----Interview with Renato Tichauer
President
Tremond Metals and Great Metals
- Tremond Metals is a trading company based in New York and established in 1993. Together with its associated company Great Metals Corp, the company is mainly focusing on tradings of raw materials with steel mills, including ferroalloys, especially ferrosilicon and manganese alloys, manganese ore, Brazilian copper ore, manganese metal, as well as minor metals, coke and other carbon products.
- Asian Metal: Thank you for joining our interview, Mr. Tichauer, please introduce your main business.
- Mr. Tichauer: Tremond Metal is a trading company based in New York and established 30 years ago, mainly focusing on global trading of ferroalloys especially ferrosilicon and manganese alloys, manganese ore, copper ore, manganese metal, minor metals, and also bulk volume of coke, anthracite, graphite electrode, pet coke, thermic coal, etc. We almost supply all raw materials that steel mills and foundries need. Our annual trading value as principal is approximately 15 million US dollars, and for the carbon products we act as an agent and the volume exceeds 70 million US dollars. For ferrosilicon, we could sell 500-600t a month in spot market and around 8,000t annually.>
- Asian Metal: Regarding ferrosilicon, how do you see the changes of country of origin of ferrosilicon import market in the US in the past two quarters this year against last year? Please talk about it based on your business.
- Mr. Tichauer: The big difference recently has been the increased import volume of ferrosilicon from China. The current relatively lower price in China and the price increase in the USA allowed more quantity of Chinese ferrosilicon to enter the US market even with the import duty of 25%. We can see from the statistics that US imported about 9,600t in the first five months of 2022 including 6,800t in May from China while there was practically almost no import in 2021. We expect more quantities entering the USA in the following months. I usually import ferrosilicon from Brazil and I didn’t buy any ferrosilicon from China last year, but I already purchased 800 tons from China this year until May. I didn’t buy in Jan and Feb but about 300 tons in Mar and imported more Chinese ferrosilicon in April and May.>
- Asian Metal: How about the Russian ferrosilicon supply in the US under the conflict between Russian and Ukraine since March? As the major ferrosilicon import origin country for the US, does the consumers in the US worry about the supply of Russian ferrosilicon in local market?
- Mr. Tichauer: There is plenty of Russian ferrosilicon imported to the US until March as some steel mills already signed long-term contracts with Russian Ferroalloys (RFA). It has not been confirmed yet that Russian ferrosilicon is not coming in. Customs status shows that there was were no import in April and May but the import volume during the same periods in the past years was small. Since Russian steel products and ferroalloys and other raw materials for steel mills are no longer protected by the GSP (Generalized System of Preferences) , there should be an import tariff of 35%. However, Russian ferrosilicon (Si＞55%) got an exemption from the duty, while most ferroalloys including ferrosilicon (Si ≤55%) face the duty of 35% since early July. Presently, some steel mills especially the public companies such as the US Steel, prefer not to buy Russian ferrosilicon or other Russian products if they have another option. Though some consumers who have signed long-term agreements with RFA for Q3 worry about the supply of Russian ferrosilicon after July, RFA claimed that they have no problem about the supply in 2022 in the US. I guess RFA would possibly purchase ferrosilicon from China to deliver the contracts If RFA cannot replenish stocks from Russian suppliers. Many consumers concern about the possibility of shortage next year, but I believe this shall not be the case anymore as some importers have been sourcing in Malaysia and China.>
- Asian Metal: What are the advantages and disadvantages for Chinese ferrosilicon against others?
- Mr. Tichauer: The quality of Chinese ferrosilicon normally can meet the general standards, but it performs not well in calcium content and size. It depends on the Chinese producers. Chinese ferrosilicon generally contains about 2% of aluminum maximumly and some producers could even control the content to less than 1.5%, while the content of calcium exceeds 1%. For clients who would like to purchase ferrosilicon Al 1%max, Ca 0.75%max, they have to purchase Brazilian ferrosilicon because the producers in Brazil use charcoal instead of semicoke furing production, which results in the content of aluminum controlled within 0.5% mostly. However, the prices of Chinese ferrosilicon are much more competitive than others presently. >
- Asian Metal: How about the current ferrosilicon prices and demand in the US spot market?
- Mr. Tichauer: Customers have been signing more long-term contracts, and the spot market has been weakening in the past weeks as customers expected prices to go down upon the increasing supply from China. Customers only purchase spot material from hand to mouth because they are also concerned with a possible recession seeing the unknown influence brought by FED's interest rate increase to restrain inflation and the uncertain demand for steel products from real estate and automobile industries. The current price (August 18th) in the spot market for Brazilian ferrosilicon could reach around USD2.20/lb Si D.D.P, while that of Chinese ferrosilicon 75%min could reach about $1.90/lb Si D.D.P.>
- Asian Metal: The U.S. started review process for additional tariffs on Chinese-origin products, namely the so called "Section 301”on May 3 . Do you think the US government would remove the tariffs? What influences it will bring to the ferrosilicon market if the 25% import duty is dismissed?
- Mr. Tichauer: It’s difficult to say whether the tariffs will be reduced or eliminated. There is a conflict of interests between the economic team of the government and the political team. The formers want the tariff eliminated to reduce the inflation, while the latter don’t want to give this benefit to China without something in return. I believe it was a mistake to impose the tariff as it would increase the price of what I call "Wallmart Inflation" since Wallmart is the biggest store in the USA and most products in Wallmart are made in China. This is the reason why many economists in the government want the tariffs to be eliminated. But is it wise to eliminate the tariffs without some negotiation with China? This makes it a political decision. Under the assumption that the 25% tariff is eliminated, prices of ferrosilicon will fall considerably in the USA.>
- Asian Metal: what’s your strategy to response to the possibility change of tariff for Chinese ferrosilicon?
- Mr. Tichauer: I’ll be ready to buy another 200-300t ton this week (August). In case that the tariff is removed, the tariff elimination shall benefit the cargos already in transit, unless the government decides otherwise. If the government removes the tariff, maybe more traders would buy Chinese ferrosilicon, and the export prices of Chinese ferrosilicon might go up at that time. The reason why I didn’t buy bulk volume is that I focus on spot business and I’m cautious about the current weak demand in spot market. I don’t think the spot demand would turn stronger until September. The demand would be solid, but the prices would be weaker due to more availability of cheap Chinese ferrosilicon.>
- Asian Metal: How do you see the price trend in Q3?
- Mr. Tichauer: I believe that prices of ferrosilicon in the US market will weaken even if the tariff remains, but I don't think the prices will collapse as the demand from steel mills and foundries should not weaken too much. Besides, it is important to remember that it takes long time to transit cargos from China or Russia to the U.S. There are also some other significant logistics problems and everything else from these countries. I think the prices of ferrosilicon in the U.S. would continue to weaken in August until September as clients keep holding cautious attitudes towards the uncertainties.>
- Asian Metal: Do you have any new project or plan in the future for your business?
- Mr. Tichauer: We are diversifying into new products and looking for opportunities for cooperation in different industries, such as ilmenite, silica 98-99%min, copper scrap, etc.>
