We recently completed the first issue of our Ferroalloys Financial & Market Insight Service. The report profiles the world’s 71 leading ferroalloy producers, providing detailed financial and production data for each ferroalloy product produced at these companies. The report also includes a detailed and up-to-date overview of the global manganese, ferrochrome, ferrosilicon and silicon metal markets, including cost curves, supply-demand balance, price forecasting and financial performance. The report will be published twice per year, with quarterly updates of the company profiles available online.
The first issue of the report highlights the patchy nature of profitability across the ferroalloys sector in 2009, following on from the boom year of 2008 when virtually all producers made good profits.
Most of the multinational mining companies with integrated ferroalloy production assets maintained quite strong profitability in 2009, despite the downturn. However, many of the medium and small-sized producers in the industry entered loss-making territory, as a result of the steep decline of demand and prices that occurred between Autumn 2008 and mid-2009.
In general, production costs for ferroalloys have not declined by anywhere near as much as ferroalloy prices since the beginning of the global downturn, resulting in prices falling below production costs for many higher-cost ferroalloy producers in 2009. This, in addition to a significant reduction in demand in many markets, prompted many producers to idle ferroalloy production through the first half of the year. Ironically, in many cases this further increased production costs on a per tonne basis, with lower production reducing the dilution of fixed costs.
With demand levels having begun to improve at the end of 2009, and the recovery beginning to gather pace in 2010, prices of most ferroalloys have begun to come under upward pressure, as the market begins to need higher-cost capacity once more. This trend is being reinforced by renewed upward pressure on production costs, with raw material and energy costs now rising again. The report details, for each ferroalloy, what we perceive to be the short-term and long-term outlook for prices for each ferroalloy from the perspective of early-2010.
What is clear is that the strongest improvement in prices and profitability is occurring in the upstream ores segment of the ferroalloy industry, with global recovery once again igniting concerns about the future availability of higher-grade ores. This is reinforcing the superior financial performance of the manganese sector, and to some extent the chrome sector, relative to ferrosilicon and silicon metal production. The report shows how this trend has developed and intensified over recent years, and is set to continue.
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