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Commodities

Low supply makes steel feedstocks pricier in Japan

Chinese supplies of silicomanganese have fallen due to stricter environmental regulations.

TOKYO -- Auxiliary steel feedstocks known as ferroalloys have grown more expensive in Japan as reduced supply from China, South Africa and elsewhere pushes up import prices. Steelmakers here may have to raise product prices to pass on higher materials costs.

Ferrosilicon, used to strengthen iron, now trades for around 140,000 yen ($1,355) per ton, up 7% from a recent low in September and the highest in 17 months.

The price of silicomanganese, with a similar application, has climbed 5% from its low last month to about 115,000 yen. Ferrochrome, a key ingredient in making stainless steel, has risen 7%.

China accounts for about 60% of world production of ferrosilicon. Supply has fallen due in part to a mass crackdown by Beijing in June on exports via third countries -- an attempt to evade taxes -- and as producers consolidate operations. With Chinese supplies costlier, steelmakers around the world have flocked to a relatively cheap Russian variety. But Russia has not kept up with the demand surge, and its supply has been unstable.

Chinese supplies of silicomanganese, production of which takes a heavy toll on the environment, have fallen due to stricter regulations. China and India are the main producers but even China is stepping up purchases from India now. Indian producers are turning down new orders from Japanese trading companies, according to an industry insider.

The market for ferrochrome, mainly produced in South Africa, also has tightened as multiple producers suspended operations. The Chinese are slowing production as well.

Demand for steel has been robust worldwide for use in carmaking and construction equipment, and, in China, as construction materials. Ferroalloy prices are largely expected to remain high, pushing up costs for Japanese steelmakers. They likely will have to hike product prices as a result.

(Nikkei)

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