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Silicomanganese producers in China to face higher production costs: sources

Silicomanganese producers in China to face higher production costs: sources

Silicomanganese producers in China face an increase in production costs in the coming weeks due to higher power costs, market sources said Tuesday. Industry sources pegged domestic silicomanganese prices at Yuan 6,450/mt ($1,050/mt) ex-works for October. This was a decrease of Yuan 100/mt from the previous month. A Beijing-based trader said that over the next few months most silicomanganese producers would decide if they can continue production on the back of the increased costs. "With winter fast approaching, power tariffs are likely to increase in the coming weeks, especially in the southern parts of China, which are highly dependent on the season," the trader said. Market sources also said that demand for silicomanganese has been slow due to weakened steel fundamentals. Most Chinese mills have likewise lowered their purchasing bids for silicomanganese. The trader also said there would be a further decrease in purchasing bids for silicomanganese, which would last until the end of the year. However, he added that even if silicomanganese prices fall further, large producers would still be able to enjoy "margins of close to Yuan 300/mt and smaller ones get to enjoy margins of at least Yuan 100/mt." Meanwhile, silicomanganese prices typically set the direction for manganese ore prices. But in the near term, high port stocks at China's main Tianjin port will act as a competitive alternative supply to seaborne cargoes, effectively capping prices of seaborne manganese ore into China until the end of the year. Industry sources said that as of Friday there were more than 3 million mt of manganese ore stockpiled at major ports. Most added that there has yet to be any drawdown in inventories since Chinese buyers returned from the week-long National Day. Market sources pegged port stock prices for 45.5%-Mn manganese ore at Yuan 34-34.5/dmtu ($4.52-4.59/dmtu). Most market sources also said they remain bearish on the market outlook until the end of the year. >>

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