The Chinese ferrosilicon market EXPLODED today. While prices have been steadily increasing over the past days, what happened on Monday was totally unexpected. Prices on the ZCE shot up rmb434 to rmb7,658 per mt for January delivery and rmb406 to rmb7,146 for February delivery.
However, the most disturbing feature was that turnover for the January contract fell to only 10,472 contracts—they average nearly 200,000 per day normally—while the February turnover was ONLY 186 contracts. Basically, the market was moving so fast that no one was willing to take a chance.
While there were various explanations, the one was the most validity that authorities have stopped ferrosilicon production for environmental reasons in the important Ningxia region, which triggered smelters to stop offering any material.
Those suppliers who were offering were quoting around rmb8,000 for 75% material, up almost rmb1,000 per mt since last week.
In Taiwan, prices were rapidly moving up, with quotes around $1,435 per mt being superseded by quotes going as high as $1,475, showing that the spike was spreading outside of China.
So, there are two questions, can the higher prices to be sustained and for how long, and two will the higher prices spread beyond Asia to the US and Europe. Betting is yes to both.