Recently, ferroalloy has experienced a rebound market after a sharp fall, whether there is a bottom support, and how will it be interpreted? This paper introduces the main points, supply and demand fundamentals and strategic suggestions.
I. Main points
Overall, the cost bottom of silicon manganese 6500-6600 is still relatively strong. Under the current fundamental situation, Zheshang Futures released the strategy of making long silicon manganese 2401 contract on October 13, referring to the entry point of 6600. This round of silicon manganese 2401 contract to the lowest down to 6532 points, do more strategy entry. However, from the driving point of view, it is difficult to see too much of the rise, the future will be a long period of time will be range-based, if it can rise to near 7000, you can consider the withdrawal of profit.
2. Fundamental analysis
At present, the fundamentals of ferroalloy itself are still weak, but from the marginal point of view, there is a certain improvement. This is mainly due to the expected decline in output and the firming of demand.
From the supply side, the production of silicon manganese is still in a relatively high position, and the profit is relatively low. Northern manufacturers have low costs, relatively speaking, there is a certain production profit, and the production is relatively positive, but the cost of southern manufacturers is relatively high, the full cost has been in the loss, and the marginal cost of raw materials is basically maintained at the margin of profit and loss. However, with the advent of the dry season, many manufacturers in Guangxi have stopped production and maintenance under the pressure of high costs, and the recent production has continued to decline, and the decline was larger last week, and the average daily production fell to 33,600 tons. This is down from the previous peak of 36,000 tons per day, so although the production is still high, but the excess supply of silicon manganese is still moderated at the margin. In contrast, the production of ferrosilicon is still in a very high position and has not fallen much recently. Overall, the supply side of the ferroalloy is less affected by the dual control of energy consumption, mainly by the production profit of the manufacturer to adjust. The profit of silicon manganese continues to be poor, and it is now at a historically low position, which is difficult to continue to explore. If costs are constant, it is harder to increase production and harder for prices to fall. In contrast, the profit of ferrosilicon is slightly better than that of silicon manganese manufacturers in the south.
On the demand side, it is mainly concerned about the trend of hot metal. Last Tuesday’s drop without warning was most likely due to the market’s fear of last Thursday’s molten iron drop. The market is expected to see a sharp decline in hot metal in the fourth quarter, against the pace of decline last year and the year before. But the reality is that hot metal rebounded slightly last week, fell slightly by 13,300 tons last week, and still maintained at a high of 2.414 million tons. In terms of absolute volume, this year’s molten iron is much higher than last year and the year before, from the point of view of the decline rhythm, last year and the year before now this time is a very smooth sharp decline, and the same period this year has been in shock has not fallen. After an exchange with a steel mill, it was found that the manufacturer did not have the will to reduce production even if it was a loss. The so-called flat control caliber is more, and the crude steel data market of the Bureau of Statistics believes that there may be a certain error, but in fact, the output of hot metal is more mainstream. Iron level control is more difficult this year, so it is not too concerned about the problem of level control, focusing on the steel mill profit to stop production and maintenance. According to the situation this year, only real estate related steel rebar, disc screw and other steel production has declined, infrastructure, manufacturing related steel production this year and there is not much reduction, so the overall steel production is still relatively high. Considering the continuous introduction of national stimulus policies, including the newly issued 1 trillion national debt for steel demand support is still relatively strong, next year’s steel demand is difficult to have a significant decline. Therefore, whether from the point of view of the demand for ferroalloy itself, or from the point of view of the cost end of the ferroalloy coke price, in the context of high-speed iron, the price is not easy to fall.
From the spot point of view, the supply of silicon manganese is still slightly excess, and the inventory is accumulating. Fundamentals are bearish, but prices are cheaper. At present, the spot of steel and Jiangsu’s silicon manganese plate should be near 6800, and the spot is also weak, and it is difficult to fall to 6500. These are based on the premise that the production of the South can not be ignored in recent years, and the bottom price is the cost of riveting the South. Although the price of silicon manganese is not good to fall deeply, the bottom is relatively clear. But big gains are also harder. After all, it is overcapacity, and once it overshoots, it will cause profits to rebound, leading to a rapid rise in production. There are two types of conditions for the sharp rise in ferroalloy: one is large-scale production restriction, and the other is that downstream demand significantly exceeds expectations, and these two points are not yet visible.
3. strategic suggestions
A, the silicon manganese plate price can be bought near 6500, as long as the futures structure is still far discount, time is on the side of the bulls.
B, the bottom of ferrosilicon is still not clear, but it should be higher than the bottom of silicon manganese. If the price of silicon iron is cheaper than silicon manganese, you can change the silicon manganese multiple single to silicon iron multiple single.
C, in theory, silicon manganese can be sold put options to obtain a certain income, but in reality, the volatility of ferroalloy options since the listing is very low, so the put is not as cost-effective as imagined. Now 01 contract sell 6500 bearish near 50 yuan, remaining more than 30 days about 7% of the income, if the right to pay more than 100 yuan, the income is better. In addition, if you want to enhance the return, you can sell a 7,000 call option, but the risk of selling the upper call will be slightly higher.
