1)The biggest change after the Spring Festival: high valuation began to repair
In the first week after the Spring Festival, futures prices rose and fell, with the 03 contract iron silicon falling nearly 800 yuan/ton and manganese silicon falling nearly 460 yuan/ton. In the whole decline process, we have not seen a significant weakening of the spot price, the ex-factory price of ferrosilicon fell 50-150 yuan/ton, silicon manganese factory basically no change. The difference in the current price fluctuation range is reflected in the basis level of iron silicon 03 contract discount of about 100 yuan/ton, silicon manganese 03 contract discount of about 150 yuan/ton. The basis was obviously repaired, the optimistic expectation before the festival was adjusted after the festival, and the problem of high valuation was obviously alleviated.
Therefore, it is more difficult and less space for futures prices to continue to fall in the way of base spread. Whether the price can continue to fall in the future depends on whether the current can fall together, that is, whether the upstream production profit can be compressed. From the point of view of the current spot production profit of the mainstream regions: the profit of ferrosilicon is good. After the rise of settlement price, the profit of Ningxia main production area is about 500 yuan/ton; The profit of silicon manganese is neutral, and the profit of Ningxia and Inner Mongolia and other main producing areas is about 200 yuan/ton. From the absolute level of profit, profit still has room for compression, and silicon manganese limited.
2)Upstream inventory pressure has not built up as much as expected
The latest data show that the upstream plant inventory of ferrosilicon is close to 60,000 tons, an increase of less than 3,000 tons compared to before the festival, and the upstream plant inventory of manganese silicon is close to 179,000 tons, an increase of only more than 10,000 tons compared to before the festival. This week's inventory data is not expected to be the highest for the first quarter, but it is also significantly lower than we expected, so upstream factories are less willing to ship at a significant loss, which will limit the scope for further price weakness in February.
The paradox of high production is building up, but needs to be matched by significantly weaker downstream demand. The weekly production of ferrosilicon is 119,400 tons, an increase of about 4000 tons compared with before the festival. The profit of ferrosilicon is good, and there is still nearly 10,000 tons of production improvement space in the future. The weekly output of silicon manganese is 205,000 tons, which increases by more than 3,000 tons compared with before the festival. There is also room for a small increase in the future. Whether a significant increase in output can drive prices down significantly depends on the capacity to undertake on the demand side. At present, the upstream inventory pressure is neutral and the contradiction of high production still needs to be accumulated.
3)Steel mills resume production space is large, the demand end of the weak space is limited
The first week after the Spring Festival, the purchasing mood of steel mills is general, mainly to consume inventory. At present, the available days of ferrosilicon steel mill inventory are 21.35 days, an increase of 1.93 days compared with before the festival; The available days of Si manganese steel plant inventory were 22.7 days, increasing by 1.91 days compared with before the festival. Inventories at the steel mill end are not low, and are expected to remain mainly in-plant inventory after sales until production is significantly increased. February may be difficult to see very strong bidding behavior.
Future steel mill production increase will bring a certain increase in demand. The production intensity of the steel mill is low, and the average daily output of molten iron is 2.27 million tons, which is about 130,000 tons away from the peak output, which means that the steel mill has a large space to resume production. After the Spring Festival, the steel mill began to increase production seasonally. Although the profit level is low now, the profit per ton of steel is around 0 value, and the profit rate is slightly over 30%, we have observed that the blast furnace that stopped production before has been arranged to resume production. As a result, the overall assessment of needs is relatively neutral.
4)Conclusion and operation suggestion
In the first week after the Spring Festival, the spot price was stable, the futures price was significantly weakened, the optimistic expectation before the festival was revised, the basis was significantly widened, and the problem of high valuation was mostly corrected. Future price decline requires profit compression to achieve, and the profit of ferrosilicon is rich, and the profit of manganese silicon is neutral, so there is a certain room for profit compression, and ferrosilicon silicon is larger than that of manganese silicon. Upstream factory inventory is less than expected before the holiday, the general pressure of large price cuts. Steel mill inventory is not low, but still in the resumption of production channel, the overall demand is neutral, short - term substantial compression of space is limited. The problem of high output from upstream plants is expected to emerge after a significant drop in demand, which will need to be judged in March. On the whole, we think that the next 1-2 weeks of iron alloy disk still have room to fall, but the fluency and amplitude can not be compared with the first week after the Spring Festival. In terms of operation, it is suggested that the early stage of selling the policy to leave the market on low prices, the ferrosilicon pays attention to the support of 7700-7800 yuan/ton, and the manganese silicon pays attention to the support of 7100-7200 yuan/ton.
