The third quarter saw both manganese silicon and ferrosilicon futures dip to lows before rebounding, with coal prices climbing and lifting costs across the board.

Rising costs fuelled bullish sentiment in both the futures and spot markets, while producer margins steadily improved.

Improved margins encouraged factories to increase their hedging sales, and delivery volumes rose noticeably.

The industry's structural overcapacity remains unchanged, and demand fell year-on-year, making high margins unsustainable.

Looking ahead to the fourth quarter, manganese silicon still faces cost pressure and overall losses, with demand unlikely to improve and profit recovery requiring a new catalyst.

Supply is expected to decline in phases, and once raw material prices weaken, cost pressure should ease.

For ferrosilicon, cost support is weakening and margins are shrinking, with both supply and demand trending lower.

Key factors to watch include geopolitics, international interest rates and exchange rates, import and export policies, expectations of supply contraction from anti-involution and energy-saving carbon-reduction policies, and how the ferrous supply chain moves affect alloy pricing.

Third-Quarter Review

In the third quarter of 2026, both the manganese silicon and ferrosilicon markets staged a bottoming-out rebound.

Coal sector prices rose steadily during the period, driving up costs for both alloys.

Rising costs sharply boosted bullish sentiment in the futures and spot markets.

At the same time, producer margins for both alloys continued to improve.

Persistently improving paper profits strengthened factories' willingness to hedge, and delivery volumes grew markedly.

The structural overcapacity in both alloy industries remains unchanged, with the supply side clearly subject to market-based adjustment based on industry profit levels.

On the demand side, both alloys saw year-on-year declines.

This supply-demand structure means high margins remain unsustainable for the industry.

Industry participants are actively using futures, options and other price risk management tools to seek better margins and sustainable, healthy development.

Prices for both alloys are expected to remain in a wide range-bound consolidation in the fourth quarter of 2026.

Core View

In the third quarter of 2026, given persistent cost pressure in the manganese silicon industry, overall industry margins were in a loss-making state.

Demand is unlikely to improve in the fourth quarter, and profit recovery still needs a new catalyst.

Pressured by high costs, factory supply is expected to decline in phases.

As raw material prices weaken, high cost pressure on producers should ease later, but whether industry margins can keep improving requires further observation.

For ferrosilicon in the third quarter, amid weakening cost support, the futures market pulled back weakly, producer offers followed the market down noticeably, and industry margins continued to shrink.

In the fourth quarter, supply is expected to decline due to shrinking margins.

Seasonal demand decline is also strongly expected.

Under a dual-weak supply-demand structure, market-based adjustments will directly affect industry margin levels.

On the macroeconomic and industrial policy front, attention should be paid to international geopolitics, adjustments in international interest rates, exchange rates and import-export policies for related supply chain products, and expectations of phased supply contraction from changes in anti-involution and energy-saving carbon-reduction policies.

At the same time, watch how ferrous supply chain products move and how that affects alloy industry pricing.

Manganese Silicon: Third-Quarter 2026 Market Review

Industry Fundamentals

Overcapacity structure unchanged.

The supply side is clearly subject to market-based adjustment based on industry profit levels.

Both supply and demand ran weak overall.

On prices: In July, manganese silicon futures and spot prices continued to weaken, with spot prices falling to around 5,550 and futures hitting year-lows.

Weaker cost support came from falling futures manganese ore and coking coal prices, but producers faced widening losses due to high ore costs.

Northern steel tender pricing was set at 5,800, down about 100 from the previous month.

In August, manganese silicon rebounded from lows, with spot prices rising to around 5,800 by month-end and futures recovering sharply.

Driven by rising coking coal and manganese ore prices, low-priced resources were tight, steel tender prices also rose, and market sentiment recovered somewhat.

Entering September, as futures fell rapidly from highs, bearish sentiment returned and producers gradually cut offers to 5,700-5,800 yuan/tonne.

On utilisation and output: According to Mysteel statistics, nationwide cumulative output for January-August 2026 was 6,299,985 tonnes, down 4.8% year-on-year.

As of August 31: total furnaces 427, in operation 134.

High-silicon manganese silicon: total furnaces 32, in operation 23.

Nationwide total furnaces 459, in operation 157.

August nationwide comprehensive utilisation rate was 30.9%, up 0.10% month-on-month.

Northern main producing regions Inner Mongolia and Ningxia remained dominant.

Southern output share stayed low due to seasonal factors and high costs.

From Mysteel's weekly data, nationwide manganese silicon output and demand from the five major steel types both stayed at historic lows in the second quarter.

Weekly average supply was around 172,000 tonnes, down slightly from the second-quarter average of 176,000 tonnes; weekly average demand was around 114,000 tonnes, down noticeably from the second-quarter average of 122,000 tonnes.

Producer inventories changed little quarter-on-quarter, but delivery warehouse inventories fell sharply.

According to Mysteel, as of mid-September, inventories at 63 manganese silicon producers nationwide were around 365,000 tonnes, still at historic highs and slightly up from 362,000 tonnes a year earlier in the second quarter.

Delivery warehouse warrant volumes declined steadily through the third quarter.

As of mid-September, warrants were about 44,000, down sharply from 83,000 a year earlier.

Manganese silicon import and export volumes account for a small share, with the overall state remaining net exports.

According to customs data, January-August 2026 manganese silicon imports totalled 2,902 tonnes.

On exports, January-August exports totalled 35,349 tonnes.

The overall state remained net exports.

On costs, the industry was in an overall loss-making state, mainly affected by sharp chemical coke fluctuations and persistently weak manganese ore.

Based on spot port manganese ore prices, manganese ore maintained a gradual decline in the third quarter.

Chemical coke fluctuated widely, falling and then rebounding sharply.

On electricity prices, Inner Mongolia and Ningxia changed little overall.

The northwest region saw notable increases.

On margins, the industry was in an overall loss-making state in the third quarter, with signs of phased margin recovery.

The northern region saw concentrated losses of about 100-200 yuan/tonne, while the southern region saw concentrated losses of about 400-500 yuan/tonne.

Steel Tender Situation

Mainstream steel tender pricing rose slightly overall.

For major steel mills, Hegang's monthly tender prices ran in the 5,880-6,050 yuan/tonne range from July to September.

The overall trend remained upward.

Manganese Ore: Third-Quarter 2026 Market Review

Manganese ore prices continued to decline overall.

Port manganese ore prices ran weak overall, with clearly bearish market sentiment.

In the third quarter, July saw manganese ore in weak range-bound trading.

Early in the month, downstream manganese silicon spot prices kept easing, factory losses deepened, and just-in-time procurement contracted.

Ample port spot supply pushed ore prices down, and spot market trading was quiet overall.

Trading-side pressure kept rising as port inventories accumulated and ore arrival costs stayed high, worsening the cost inversion problem.

High port manganese ore inventories further suppressed prices.

In August, the manganese ore market showed a pattern of low early, high later, with bottoming and stabilising mid-month and prices warming and testing higher late in the month.

Early in the month, the market extended the prior decline, with port spot prices in full loss.

As manganese silicon futures improved, pessimism eased somewhat.

In mid-to-late August, manganese silicon futures stayed firm, factories gradually hedged, raw material cost support rose, and low port offers for manganese ore decreased, turning to test higher.

Entering September, the manganese ore market weakened and declined again.

Futures fell sharply, downstream factory margins shrank again, and the intent to press ore prices was clear.

Mainstream mine futures offers continued to fall.

Overseas mainstream mine offers declined overall in the third quarter.

The latest mainstream mine South32 South Africa semi-carbonate October offer was 4.2 USD/dmtu, down 0.65 USD/dmtu from the July offer of 4.85 USD/dmtu; Comilog Gabon October offer was 4.7 USD/dmtu, down 0.48 USD/dmtu from July's 5.18 USD/dmtu.

Manganese ore imports for January-August totalled 23.1429 million tonnes, up 11.86% year-on-year.

The latest customs data show January-August 2026 manganese ore imports totalled about 23.1429 million tonnes, up 2.4541 million tonnes or 11.86% from about 20.6888 million tonnes in January-August 2025.

Port inventories showed overall accumulation in the third quarter.

As of mid-September, total manganese ore inventories were 6.24 million tonnes, up 900,000 tonnes from 5.34 million tonnes a year earlier in the second quarter.

Among them: Tianjin port 5.31 million tonnes; Qinzhou port 790,000 tonnes.

Manganese Silicon: Fourth-Quarter 2026 Outlook

Supply-demand balance estimate: Given persistent industry cost pressure and shrinking factory margins, supply is expected to stay low early in the fourth quarter.

Meanwhile, seasonal demand decline is strongly expected.

In the fourth quarter, the market supply-demand structure is expected to show dual declines and inventory build-up.

Macro factors will still affect the market later, and both supply and demand face many uncertain variables.

Key focus areas later: geopolitical conflicts and domestic and international interest rate changes and their impact on commodity cost and liquidity; supply contraction expectations from changes in anti-involution and energy-saving carbon-reduction policy direction; the role of margin changes in market-based supply-demand adjustment; price trends of ferrous supply chain products; changes in factory, social and steel mill inventories, and how inventory pressure affects price expectations.

Ferrosilicon: Third-Quarter 2026 Market Review

Futures and spot prices overall surged then fell back.

In the third quarter of 2026, the ferrosilicon market strengthened gradually in July and then ran stable.

Early in the month, the market extended its weak trend with narrow range-bound prices.

Late in the month, with maintenance by leading Ningxia producers and Qinghai capacity electricity price increases taking effect, ferrosilicon futures repeatedly tested 5,950.

In August, ferrosilicon ran in a range-bound uptrend.

Early in the month, concentrated production cuts in Gansu and higher settlement electricity prices in Ningxia and Gansu raised supply contraction expectations, pushing futures higher, with the main contract once touching above 5,950 yuan/tonne.

Afterwards, as sentiment cooled and restart expectations rose, prices pulled back slightly.

Late in the month, higher blue carbon costs and supply-side support solidified the bottom, and market prices moved higher again.

Entering September, futures surged then fell quickly, gradually consolidating downward.

Producer offers followed the futures market weaker.

Industry Fundamentals

Output rose slightly by 2.4% year-on-year in January-August, while demand trended down.

On output and utilisation: January-August 2026 cumulative output was 3.718 million tonnes, up 880,000 tonnes or 2.4% from 3.63 million tonnes a year earlier.

July ferrosilicon output grew notably, with Ningxia's production cut most prominent among main regions.

Qinghai actively restarted given lower costs and high futures prices, with Qinghai Fuxin commissioning its first replacement large furnace mid-month.

Gansu output trended up as new capacity was gradually released and major plants restarted.

Nationwide July output was 506,620 tonnes, up 4.83% month-on-month or 23,300 tonnes.

August ferrosilicon supply showed "slightly lower total, sharp regional divergence," with Gansu cuts and Ningxia restarts offsetting each other.

Gansu leading producers cut output clearly due to high electricity prices, Ningxia leading producers restarted gradually but slowly, Qinghai maintained high utilisation given good hydropower conditions, and Inner Mongolia leading producers conducted routine maintenance with slightly lower output.

Nationwide August output was 500,110 tonnes, down 1.28% month-on-month or 6,500 tonnes.

Year-on-year versus August 2025 (493,300 tonnes), output rose 1.38% or 6,800 tonnes.

On demand, National Bureau of Statistics data show January-August crude steel output was 651.85 million tonnes, down 3.1% year-on-year.

January-August pig iron output was 563.40 million tonnes, down 3.1% year-on-year.

January-August steel products output was 950.75 million tonnes, down 1.7% year-on-year.

Third-quarter national magnesium ingot output averaged 96,400 tonnes per month, up 23,100 tonnes or about 31.5% from 73,300 tonnes a month a year earlier.

Ferrosilicon industry inventories overall at historic highs, warrant volumes at year-low levels.

According to Mysteel, as of mid-September, inventories at 60 independent ferrosilicon producers reached 82,000 tonnes, up 11,000 tonnes from 71,000 tonnes a year earlier in the second quarter.

On delivery inventories, in mid-June warrant volumes reached about 6,800, or about 34,000 tonnes, at a year-low level.

Ferrosilicon net exports for January-August totalled 204,000 tonnes.

According to customs data, January-August 2026 China ferrosilicon exports totalled 278,000 tonnes, up 7,000 tonnes from a year earlier; January-August China ferrosilicon imports totalled 74,000 tonnes.

Costs continued to rise overall, with large margin fluctuations.

On the ferrosilicon cost side in the third quarter, the domestic blue carbon market ran stable in July with relatively balanced bull-bear forces and no clear driver, with mainstream prices range-bound for long.

Lump coal prices fluctuated several times but had limited impact on blue carbon prices.

In August, the blue carbon market showed a clear stable-then-up pattern, with two sharp price hikes late in the month releasing concentrated bullish sentiment.

Late in August, mainstream Inner Mongolia calcium carbide enterprises raised blue carbon procurement prices twice in a row, with hikes exceeding market expectations.

Blue carbon small material prices rose to 930 yuan/tonne.

In early September, blue carbon rose sharply again, then gradually declined from highs as lump coal fell back.

On electricity, Ningxia ferrosilicon settlement electricity prices rose slightly in July overall, with normal producers seeing increases of less than 1 fen, concentrated at 0.4-0.43 yuan/kWh, while some producers under maintenance or cuts saw increases of 4-7 fen.

Qinghai July settlement electricity prices were stable on average, with ferrosilicon producer prices around 0.307-0.41 yuan/kWh, averaging 0.34 yuan/kWh.

Gansu July settlement electricity prices generally rose, with sample ferrosilicon enterprise prices at 0.44-0.46 yuan/kWh, averaging about 0.45 yuan/kWh, mainly due to higher monthly grid system operation fees.

Ningxia ferrosilicon settlement electricity prices trended down overall in August, mainly due to lower system operation fees.

Most enterprises saw declines of 1-2 fen, with some in gradual restart after maintenance seeing larger declines, with overall prices concentrated at 0.39-0.41 yuan/kWh.

Gansu and Shaanxi saw lower system operation fees in September, while Qinghai saw higher fees.

Steel Tenders and Deliveries

Steel tender pricing rose overall.

In the third quarter of 2026, northern mainstream Hegang steel tender pricing was 5,900-6,340 yuan/tonne, showing a trend of increases, at historic low levels.

Tender volumes stayed at historic mid-range levels.

Ferrosilicon: Fourth-Quarter 2026 Outlook

Supply-demand balance estimate: Given cost differences among main producing regions, overall cost support is expected to shift lower.

Supply is strongly expected to decline in the fourth quarter.

Meanwhile, seasonal demand decline is strongly expected.

In the fourth quarter, the market supply-demand structure is expected to show dual declines and inventory build-up.

Macro factors will still affect the market later, and both supply and demand face many uncertain variables.

Key focus areas later: how ferrosilicon downstream margins affect domestic demand and overseas export demand; producer cost-side changes in coal and energy prices; how margin trends affect ferrosilicon supply; changes in factory and social inventories and how price pressure affects market-based destocking; price trends of ferrous supply chain products; supply contraction expectations from changes in anti-involution and energy-saving carbon-reduction policy direction.