Market Review] Ferroalloys recently rebounded slightly due to environmental inspections, but high inventory levels and coal supply constraints suggest a continued weak and volatile outlook.

[Core Logic] Steel mill profit margins continued to decline, falling below 40%. Pig iron production, affected by the decline in steel mill profit margins, is expected to continue its slight downward trend. Ferroalloy demand is expected to decrease. The five major steel products are experiencing excessive inventory accumulation beyond seasonal norms, and ferroalloy inventories are also high. Ferroalloys currently face a contradiction between high inventory and weak demand. Ferroalloy production profits are gradually declining, and the market has little expectation of further production increases. Downstream demand is about to enter the off-season.Ferroalloy inventories are high; ferrosilicon and ferromanganese inventories are at their highest levels in nearly five years. Ferromanganese inventories continue to accumulate, up 10.3% month-on-month, while ferrosilicon inventories up 3.3% month-on-month, indicating significant inventory pressure. Ferrosilicon production began to decrease this week, and ferromanganese production has been decreasing for several consecutive weeks.Downstream demand is gradually weakening, and inventory reduction will likely still require production cuts.

[Nanhua Viewpoint] Ferroalloys face a fundamental situation of high inventory and weak demand. On the cost side, coking coal prices may shift downward due to supply guarantees, but the downside for ferroalloys is limited. Ferroalloys are expected to fluctuate with a slightly bearish bias.

(Source: Nanhua Futures)