Chinese Silico Manganese Draws 24% Korean Duty

Silico and manganese (SiMn) exports from China to South Korea have attracted final dumping duties ranging between 17.5-24.68 per cent, excluding eight per cent import duty.

However, nine producers, including SiMn exports major Minmetals, which have agreed to export SiMn at $450 cif (cost insurance freight), have been excluded. Dumping duties will be effective from March 10, 1998 to 2003.

But the price of Chinese SiMn is still lower than the domestic price which will pose problem for the Korean producers.

The floor price for Chinese SiMn with 60 per cent Mn and 14 per cent Si will be $450 and for SiMn with 65 per cent Mn and 16 per cent Si it will be $480, effective from August 19 to end 1998. Export floor price will be reviewed in early 1999. Though the move may not of much comfort to Indian SiMn exporters, it will raise the price level slightly. China today is the biggest producer of ferro alloys with a capacity exceeding five million tonne and production at around four million tonne.

 

According to the Metal Bulletin Monthly of June 1998, the motto of the Chinese ferro alloy industry is "surrender profit rather than market". The ferro alloy industry there is incurring losses for the last three years and its exports are attracting dumping action in most countries.

The writer in Metal Bulletin who is editor of the China Metals says that in the eighties when steel production rose 76 per cent, ferro alloy production increased by 140 per cent. And in the nineties, ferro alloy production increased from 2.38 million tonne in 1990 to 4.33 million in 1996, up 82 per cent. But raw steel production rose by only 55 per cent from 65.35 million tonne to 101.24 million tonne.

The ratio between ferro alloy production and steel production which was 26.8 kg to one tonne of steel jumped to 42.7 kg to one tonne. In 1995 there were more than 1,000 ferro alloy units operating in China with a capacity of 5.5 million tonne.

There are 18 large producers but they could not increase their production during nineties. Out of the 1,000 furnaces operating in the industry, half are of less than 1.8 MVA, with primitive technology. They encroach on markets of the bigger 18 producers causing losses. The larger units suffered a loss of 300 million yuan in 1996 or $36.2 million and in 1997 the losses were more.

Power rates have increased from around 0.05 yuan to 0.08 yuan per kwh to 0.35 yuan per kwh, or around four US cents per kwh, which is only half the Indian rate. Even then the Chinese ferro alloy units are said to be defaulting in paying their electricity dues and today power constitutes around 60 per cent of the average cost of production and as high as 70 per cent in the case of ferro silicon.

While the power costs go up, because power utilities are monopolies both in India and China, ferro alloy producers are unable to put up prices as there is keen competition between them. In India the smaller units are affecting the performance of the major ones. Similarly in China, the bigger, more efficient and environment-friendly plants are going downhill, while smaller ones get relief, which the bigger ones are not entitled to.

The power rates are high for bigger units, almost double of what smaller units pay. The older and bigger plants have to pay social benefits to workers like pensions which the new units do not pay. Small units also get tax benefits or reliefs and they are also securing more orders through questionable means.

The big units are unable to pay their electricity dues or repay the loans. But China is not a market economy and the units, big and small, are continuing to work. The government has awakened to this reality and is now busy banding together five of the bigger producers and trying to make them technically up to date and cost-efficient. Their power dueare likely to be waived off, loans written off and fresh capital may injected to keep them going and efficient.

Chinese ferro alloys exports are likely to trouble exporters and the prices will remain depressed. Indian ferro alloy industry will find that their troubles continuing for quite some time.