[Ferro-alloys.com]Ningxia Autonomous Region is a major ferroalloy production area of China. On the aspect of capacity, the government demanded that all ferroalloy enterprises should be put into production by the end of September, so many submerged arc furnaces started operation in September. Overall ferroalloy capacity increased by about 500,000 mt in Ningxia. This capacity increase would intensify intraregional competition and regional competition.

On the aspect of operation, operation rate in Ningxia fell below 50% when the market was very weak this year. In the past months, it turned better. Operation rate in Ningxia rose to about 80%. As smelting electric furnaces were started, production cost was not high and enterprises were very flexible on operation. If loss increased or sales decreased, enterprises could start more new furnaces and shut more old furnaces. Therefore, output increase was not certain.

On the aspect of cost, electricity price was the key element. It took 8000 KWH electricity to produce one mt of FeSi and 4000 KWH to produce one mt of SiMn. Some enterprises had waste heat power generation projects and some could get government subsidy. Their power price could be lowered by RMB 0.1/KWH. That was RMB 800 for one mt of FeSi. Cost gap was enlarged like this. Most subsidies were provided to large enterprises at present in Ningxia and it was horrible for small companies.

On the aspect of inventory, there was not much storage for both manufactures and traders. Present price was low and it was not profitable to increase inventory. On the other hand, output reduced much earlier days and most inventory had been digested.

On the aspect of sales mode, most mills took open tenders but ferroalloy manufacturers had other options. Most mills were faced with tight fund and the payback period was very long at present. Large ferroalloy manufacturers would pick reputable mills as partners. Some manufactures sold to traders to ensure rapid collection. In the Southwest, most manufactures supplied to mills directly and in the Northwest, more traders took part in the game.

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• [Editor:Mike.zhang]