AP-42 12.4 Final Background Document for Ferroalloy Production
Energy in the shape of a ferroalloy: FeSi from a European...
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Energy in the shape of a ferroalloy:
FeSi from a European perspective
Kevin Fowkes
Ferroalloy Industry ConsultantFerroalloy Industry Consultantwww.kevinfowkes.com
15th November, 2010
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What is ferrosilicon?
• A ferroalloy of iron and silicon (FeSi), normally ~75% Si
• Used extensively in molten crude steel as a de-oxidising agent
• Also used to add electrical conductivity and corrosion-resistance properties to
steel
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steel
• Average Si content of steel is 0.3%. Many individual grades are much higher
in Si – stainless steel (up to 1% Si), electrical steels (up to 7% Si)
• Around 70% of global FeSi output is used in steel
• Other important applications are for de-carburising molten grey iron for the
production of foundry castings (20% of global FeSi consumption) and for
producing magnesium metal in China (7% of global FeSi consumption)
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Global bulk ferroalloy revenues
(billion US$)
FeSi accounts for 20% of the ferroalloy sector, with
projected global revenues of US$11bn in 2010
60
80
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0
20
40
2004 2005 2006 2007 2008 2009 2010F
Silicon metal
Ferrosilicon
Chrome
Manganese
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Average industry EBIT margin
The FeSi business has been consistently less profitable
than the manganese and chrome businesses
40%
60%
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-20%
0%
20%
2004 2005 2006 2007 2008 2009 2010F
Manganese
Chrome
Ferrosilicon
Silicon metal
Based on analysis of financial results of 50 major ferroalloy producers
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Typical electricity consumption
(MWh per tonne)
FeSi is driven by electricity rather than raw materials –
a fundamental difference from FeMn/SiMn and FeCr
10
15
60%
80%
Raw materials as percentage of
Chinese cash operating costs (2010)
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0
5
10
0%
20%
40%
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Ferrosilicon market characteristics
• “Standard” ferrosilicon accounts for ~85% of global FeSi consumption
(Standard FeSi is 75% Si, 1.5% Al, 0.1% Ti, 0.1% C, balance Fe)
• The remaining 15% of global FeSi output is special grades – magnesium FeSi
and inoculants for foundry castings, high-purity and refined FeSi for alloy and
electrical steel production
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electrical steel production
• Standard FeSi production is overwhelmingly dominated by China and Russia
• Special FeSi grades continue to be mainly produced by established western
producers in Europe, N.America and Brazil
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Crude steel production since collapse of Lehman Brothers
(Index, Sep 2008=100)
European steel output has recovered only sluggishly,
reducing Europe’s share of global FeSi demand
120
140
160
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40
60
80
100
120
China
N.America
Europe
Asia exc. China
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China
Rest of Asia
China
Rest of Asia
World FeSi
Production (2010)
World FeSi
Consumption (2010)
Europe now only represents 12% of world FeSi
consumption and 8% of production
Europe
N.America
S.America
CIS
Africa & Mid East
Europe
N.America
S.America
CIS
Africa & Mid East
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Total volume 6.9 million tonnes
12%8%
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StandardCarbon steel
European FeSi
consumption by end-use
European FeSi
consumption by grade
Speciality grades make up over 20% of the European
FeSi market, more than in most other regions
HP, low-Al, low-C
MgFeSi, inoculants
Stainless steel
Foundry
Other
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• The European Commission imposed provisional anti-dumping duties on
ferrosilicon imports in August 2007. The final duty rates were imposed in
February 2008
• The exporting countries affected by the duties were China, Egypt,
Kazakhstan, Macedonia and Russia
Anti-dumping duties have had a significant
impact upon the European FeSi market
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Kazakhstan, Macedonia and Russia
• Since the duties were imposed, there has been a significant reduction in
ferrosilicon exports to the EU from all these countries, most notably China.
Spot prices in Europe now normally trade at a premium
• Duties are for the standard 5-year term but can be subject to interim review.
Macedonia’s duty was eliminated by a review in 2009. A review into the duty
on Russia was instigated in 2010
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FeSi anti-dumping duty rates in the European Union
China – Erdos 16%
China – others 29 – 31%
Egypt 15 – 18%
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Kazakhstan 34%
Macedonia 5%*
Russia 18 – 23%**
* Reduced to zero in review, Dec 2009
** Currently subject to review
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Market share, EU FeSi market
European producers have significantly recovered their
market share since AD duties were imposed
60%
80%
100%
CISChina
Brazil
Others
AD duties
imposed
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0%
20%
40%
60%
European
producers
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Standard 75 FeSi spot prices
(US$/tonne)
Since AD duties were imposed, European FeSi prices
have held a consistent premium over other regions
2,000
2,500
3,000
China export
AD duties
imposed
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0
500
1,000
1,500
2,000 China export
USA
Europe
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Chinese FeSi production by destination
(million tonnes)
China’s FeSi exports unlikely to return to 2007-2008
levels due to rising domestic demand and export tax
4
6
Exported
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0
2
4
2004 2005 2006 2007 2008 2009 2010F
Consumed domestically
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Elkem Iceland
Finnfjord
Elkem Salten
Elkem BremangerElkem Bjolvefossen
Fesil Rana
A map of the European ferrosilicon industry
NORWAY &
ICELAND
Ferroatlantica
Chateau FeuilletFerroatlantica Cee
Ferroatlantica Dumbria
Ferroatlantica Laudun
Ferroatlantica Pierrefitte
Huta LaziskaOFZ
Silmak
FRANCE &
SPAIN
EASTERN
EUROPE
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22%13%2%
Ferroatlantica
Elkem
Share of European FeSi
production
(2010)
Over 50% of European FeSi output is controlled by two
companies, and 98% is controlled by five companies
34%13%
16%
Fesil
Finnfjord
Huta Laziska
OFZ
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Full production cost curve, FeSi
(global ex-plant ranking, excluding taxes and duties)
European FeSi production costs tend to be high, but that
does not necessarily question their survival
European producers
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• The major producers remain leaders in the production of premium-priced
speciality grades, with only limited competition from overseas. The European
producers are also technology leaders in an era of increased environmental
awareness and legislation
• Economics of exporting ferrosilicon from China to Europe are bad, even
Reasons to be cautiously optimistic for the future of the
European ferrosilicon industry
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• Economics of exporting ferrosilicon from China to Europe are bad, even
disregarding the existence of anti-dumping duties. China pulling back from
exporting to other markets has also reduced exports to Europe from other
sources
• Anti dumping duties against China likely to remain in place for next 2-3 years
at least
• Changes in ownership structure of the European FeSi industry are likely, and
should be a good thing
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Thank you for your attention today
Check out my websitewww.kevinfowkes.com
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