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Black Metal Market Daily Report Summary - October 23, 2024

Market Overview

On October 22, 2024, the main black metal futures experienced mixed but predominantly bearish trends. The silicon iron (SF501) and manganese silicon (SM501) contracts both closed lower, reflecting continued pressure from surging inventories and moderate demand recovery. RB2501, HC2501, I2501, and other black metals saw price declines with reduced volume in some cases.

Key Insights by Metal

Silicon Iron (FeSi)

• Price Movement: The SF501 contract closed at 6,316 yuan/ton, down 0.94% from the previous trading day. Trading volume decreased significantly, indicating reduced market activity despite minor fluctuations during the day.
• Supply & Demand: Restored production capacity is increasing, particularly in the Ningxia region. Steel mills are gradually returning to production but at a slower pace recently. Metal magnesium demand shows slight improvement.
• Technical Analysis: The daily KDJ indicators remain bearish, with the MACD line showing amplified bearish momentum.
• Fundamental Outlook: A short-term bearish trend is expected due to higher inventories relative to production. The policy-driven price surge last month is fading as expectations normalize.

Manganese Silicide (MnSi)

• Price Movement: SM501 closed at 6,110 yuan/ton, falling 0.49%. Holdings slightly decreased, while price inventories surged to elevated historical levels.
• Supply & Production: Mn ore production faces localized disruptions, but overall inventories remain high at 64.97 million tons. Several mining operations indicated temporary shutdowns, but elevated inventories suggest minimal impact.
• Technical Analysis: The KDJ indicators diverged slightly, while the MACD showed amplified bearish momentum.
• Fundamental Outlook: Despite reduced production, inventories remain abundant, neutralizing short-term support. Excess supply and high inventories suggest a longer-term bearish market structure.

Broader Market Trends

• Metalurgic Production Decline: National steel output fell 6.1% month-on-month in September, continuing a downtrend for six consecutive months.
• Real Estate & Construction: Durable goods and home appliance production saw strong growth, potentially offsetting industrial metal demand.
• Energy: Steel and coal output declined significantly but showed a slight uptick in cumulative annual production.
• Infrastructure: High rates of building machinery (excavators, loaders) production point toward continued industrial stimulation.

Technical & Fundamentals

• MnSi/FeSi Inventories: High inventory levels persist across both metals, particularly in silicium-based products, challenging fundamentals.
• Futures Basis: The basis between spot and futures prices remains firm for some regions, while others bear significant backwardation.
• Input Costs: Reduced revenues from coking coal coupled with slightly higher power prices in certain regions weigh on FeSi margins.

Outlook

Black metals face persistent pressure from overcapacity and high inventories, with demand recovery lagging. Federal and regional policies may continue to exert upward pressure in the short term, but fundamentals suggest resistance. Resurgent ore production and elevated inventories could reinforce a bearish view.