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Silicomanganese demand rising due to new China rebar regulation

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Silicomanganese demand rising due to new China rebar regulation

Hong Kong — New Chinese rebar standard rules, and the resultant banning of Quenching & Tempering, QTB production process of the bar, is expected to hike Chinese silicomanganese demand, as the state's plan of wiping out water cooled rebar would spur producers to add manganese in future rebar production, Chinese industry sources said Wednesday.

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The new rebar standard, which came into effect November 1, is aimed at preventing water cooled bar disguised as hot rolled rebar from circulating in the market, Wuhan-based Chinese brokerage Changjiang Securities said in its monthly ferroalloy report.

Assuming manganese ratio of 0.4%, and annual domestic water cooled rebar output volume of 100 million mt and 150 million mt, the annual demand for silicomanganese would rise by 620,000 mt and 920,000 mt, respectively, data from China's Standardization Administration showed.

Currently some Chinese plants use over 23 kg of silicomanganese for each ton of rebar, but others use just less than 10 kg, so the latter have the need to hike silicomanganese usage on the new rebar rules, Chinese sources said.

Following the start of the new rebar rules, silicomanganese stocks have been sold out, to Chinese steel plants, Chinese sources said.

Chinese industry experts said though the winter heating season in China during October to March, is expected to cut national molten iron output by 4 million to 6 million mt/month, this would effectively reduce silicomanganese demand by 30,000 mt to 40,000 mt/month. With the new rebar standard demand could increase to between 40,000 mt to 80,000 mt/month.

State-owned Tianjin Finance Bureau's research arm, First Futures Brokerage Co. said in its report that as the winter heating season output cut for 2018-2019 was not as stern as expected, there is still room for a rise in prompt silicomanganese demand, on the revised rebar rules.

Chinese industry analysts said the steel sector in South China, notably in the provinces of Fujian and Jiangxi commonly used the water cooling process, so the new rule could spur an hike in silicomanganese demand, but noted the actual impact could only be visible in Q1.

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Spot Chinese siliconmanganese supply in the recent weeks has been tight amid the cold winter. Power shortage has also hit production in the key mainland production zones, so this could cause an unstable supply in the near run, the bureau's researcher said.

China's national siliconmanganese output in October was 920,000 mt, up 50,000 mt from September, on higher volume in Guangxi, Inner Mongolia and Ningxia areas, the bureau data showed.

Meanwhile, Chinese manganese ore stocks are on the rise, with ore volume as of November 9 at key domestic ports at 2.838 million mt, up 160,000 mt week on week, with stock levels seen rising further in the coming weeks, Tianjian Finance Bureau data showed.

--Joshua Leung, newsdesk@spglobal.com

--Edited by Elizabeth Thang, newsdesk@spglobal.com