Ferrosilicon prices are slowly climbing out of a two-year bear market. China domestic 72% FeSi is trading at approximately 6,800-8,000 RMB per metric ton in late July 2026, up about 4.6% quarter-on-quarter from Q4 2025 levels, according to industry data. The recovery follows a prolonged period when prices in Ningxia averaged 5,048-6,161 RMB/t through 2025, a level well below production cost for most smelters.
The export market is also improving. Ferrosilicon export prices have risen to approximately $1,000-1,150/t as of early 2026, with signs of stabilization after two consecutive years of decline. Sources note that 2026 has started to show signs of recovery, driven by recovering steel demand in major markets and firm energy prices that constrain low-cost producers.
The supply side is concentrated and energy-sensitive. Inner Mongolia and Ningxia are the core production bases in China, accounting for roughly 1.82 million and 1.33 million tonnes of annual output respectively. Ferrosilicon smelting is intensely energy-intensive - electricity represents 55-65% of production cost - meaning that power prices directly determine the marginal cost curve. In regions with favorable hydropower (Sichuan, Yunnan), seasonal production costs vary by 15-20% between wet and dry seasons.
Demand from the steel sector is the primary driver. Ferrosilicon is added to molten steel during casting to deoxidize and to produce electrical-grade silicon steel. Global steel production ran at approximately 1.95 billion tonnes annualized in H1 2026, with Chinese output contributing roughly 54%. Any sustained steel production recovery would directly increase FeSi consumption. The silicon steel segment, used in transformer cores and electrical motors for EVs, is growing at 5-7% annually and consumes high-grade FeSi with 75% silicon content.
The magnesium sector provides an additional demand channel. Magnesium metal producers use ferrosilicon as a reductant in the Pidgeon process, consuming approximately 1.1-1.2 tonnes of FeSi per tonne of magnesium produced. Global magnesium output was approximately 1.1 million tonnes in 2025, almost entirely from China. If magnesium prices recover from their current trough, higher Mg production would lift FeSi demand.
Analyst views are cautiously constructive. SMM expects China domestic 72% FeSi to average 7,000-8,000 RMB/t in H2 2026, with the upper end of the range achievable if steel production remains strong through the Q4 restocking period. The bear case sees prices slipping back toward 6,500-7,000 RMB if steel mill profitability deteriorates and producers reduce alloy consumption. The wild card is the carbon transition - if Chinese authorities impose tighter emissions limits on ferroalloy smelters (which are among the most carbon-intensive industrial processes), capacity closures could tighten the market significantly.
Ferrosilicon buyers should view the current market as a favorable equilibrium. Prices have bottomed and are recovering, but remain well below the 2022 peaks of 12,000+ RMB/t. The key risk is energy-driven supply shocks: any disruption to hydropower availability in Yunnan or Sichuan during peak production season (Q3) could remove 15-20% of Chinese output temporarily, triggering a sharp price spike. Buyers with annual consumption of 1,000+ tonnes should negotiate H2 2026 contracts at 7,000-7,500 RMB/t with quarterly price reopeners tied to published SMM indices. For seaborne buyers, the $1,000-1,150/t export range offers predictable landed costs given stable freight rates. The silicon steel growth story is real: transformer-grade electrical steel demand from grid investment and EV motors is growing at 5-7% annually, creating a structural demand floor that was not present in the 2019-2023 cycle. Maintain 45-60 days inventory and monitor hydropower availability in Sichuan weekly from August through October.