Soaring Power Costs May Drive Up Indian Ferro-Silicon Prices and Curtail Production

Ferro-Silicon

Ferro-silicon producers in Meghalaya, India, are facing a challenging period due to rapidly increasing power costs. On 26 October 2024, the Meghalaya State Electricity Regulatory Commission raised the electricity tariff by 1.47 rupees/kWh, bringing the new rate to Rs 6.47/kWh. This tariff hike, which is set to remain in effect until March 2025, is putting immense pressure on the region’s ferro-silicon industry, known for its energy-intensive production processes.

As a result of these rising energy costs, producers in Meghalaya have already reduced their output by 15-20%, and further increases in power tariffs could significantly impact their profit margins. Sources indicate that the combination of higher power costs and strict environmental regulations could lead some producers to cut back further on production or even shut down operations entirely if price adjustments for ferro-silicon do not sufficiently offset the added energy expenses.

Ferro-silicon production requires a large amount of electricity, with approximately 8,500 kWh of power needed for every tonne of ferro-silicon produced. As such, the new tariff will increase the cost of production by more than Rs 12,000 per tonne (approximately $142.71 per tonne), which is significantly higher than the previous year's energy costs. Given the competitive nature of the global ferro-silicon market, this cost increase may lead to higher prices for consumers while squeezing producers’ margins.

Although some producers in Meghalaya restarted their operations in mid-October after a temporary shutdown caused by stricter environmental regulations, the persistent rise in energy costs is threatening to disrupt the recovery. Producers are now at a crossroads—if the November ferro-silicon prices fail to reflect the higher power costs, several facilities may be forced to shut down again, exacerbating supply shortages and potentially driving further price increases.

The Future Outlook for Indian Ferro-Silicon Production

With India being a significant global producer of ferro-silicon, especially in regions like Meghalaya, the outcome of this energy crisis will have wide-reaching implications. If producers continue to struggle with escalating electricity costs, the production slowdown could not only raise domestic prices but also affect export markets. As ferro-silicon is a crucial component used in steelmaking, any supply disruptions in India could put pressure on the global supply chain.

Despite the challenges, the situation presents an opportunity for alternative power solutions, such as renewable energy, to help stabilize production costs. However, without significant intervention or price adjustments, the future of India's ferro-silicon production may be uncertain in the coming months.