Chinese steel mills' credit woes have further depressed domestic silicomanganese prices, market sources said Monday.
Domestic silicomanganese prices were pegged by the sources at about Yuan 6,600/mt ($1,083/mt), about Yuan 200-300/mt lower than steel mills' bids earlier in the month.
"Although we have a stream of contractual agreements for our silicomanganese, the problem now is whether our customers can pay up," said a Guizhou-based silicomanganese producer.
With stricter rules and regulations on environmental protection by the central government, production costs at steel mills have risen in the past few months. Steel mills in China have tried to pass on these increased costs to their customers, but have not been successful, sources said.
Platts previously reported that in an attempt to rein in excessive steel capacity and curb environmental pollution, authorities in north China's Hebei province are threatening to raise water and power charges to local steel producers that fail to meet industry standards.
Hebei boasts about 310 million mt/year of crude steel capacity -- accounting for one third of China's total -- and over January-November last year produced 177.7 million mt, or 25% of the country's total.
China's crude steel output growth is expected to slow to below 5% year on year in 2014 from 7.5% in 2013.
"Most of the Chinese traders are currently waiting to see what the government would announce next month," said a Shanghai-based trader. He added that he hopes that would help boost "confidence" in the market.
The Chinese government would convene at the National People's Congress on March 5 to approve various proposals, including state budgets, and draft the economic plan for 2014.