Such a reduction would represent a fall of $0.15 per lb or 9.2% for the fourth quarter compared with the third quarter price of $1.38, which was in itself a 2.8% or 4 cent reduction from the second quarter.

Metal Bulletin’s ferro-chrome benchmark indicator predicted $1.21 per lb on September 14.

The quarterly benchmark is negotiated each quarter by a leading South African ferro-chrome supplier and a leading European mill; usually Glencore and Aperam respectively.

The fourth quarter announcement is expected at the end of this month.

While the market improved beyond expectations toward the end of the second quarter of the year, resulting in a smaller-than-anticipated reduction in the third-quarter price, the fourth quarter outlook is weaker than earlier estimates, market sources said.

Bearish factors include weak demand and an influx of cheap material from India that undermines prices for higher quality material offered in Europe, sources told Metal Bulletin.

"Demand load is not looking as strong as had been first thought and there is no shortage of material. I will not be buying for a couple of weeks but I expect the fourth quarter will be substantially down," a consumer said.

A trader agreed, adding that he believes the third-quarter price ended up lower than it should have.

“I didn’t think the market improved that much ahead of the third quarter settlement and when reality set in the third quarter benchmark was overpriced,” the trader said, predicting a fourth quarter price no higher than $1.22 per lb.

“It needs to be lowered to reflect what has happened the last two months,” the trader added.

Spot prices have dropped by as much as 10% since the third-quarter settlement was released on July 2.

Metal Bulletin’s price quotation for high-carbon ferro-chrome, delivered into Europe dropped 5 cents week on week to $1.20-1.30 per lb on Friday September 21. It had been at $1.30-1.45 per lb on July 6.

Anticipation of further price declines has reduced European high-carbon ferro-chrome market liquidity.

“I am starting to see lower numbers entering the high-carbon ferro-chrome market but people are holding off buying in anticipation of lower prices,” a trader told Metal Bulletin.

Recovery in UG2, charge chrome prices
Still, there are some who remain optimistic about fourth-quarter prices, citing higher prices for both chrome ore and ferro-chrome in China.

The Metal Bulletin UG2 chrome ore index has been rising since it bottomed out at $155 per tonne on August 24 and was calculated at $162 per tonne on September 21.

Charge chrome imports into China also showed signs of recovery, with Metal Bulletin’s charge chrome index rising 2 cents to $0.83 per lb on September 14 and holding there on September 21. It had dropped to $0.81 per lb in late August.

“The momentum is on the upside. The Chinese market has come up off the bottom and there is not much ferro-chrome around globally so there is optimism for the fourth quarter,” a producer said.

Recent rises in the market have dampened expectations of sharp fall for the fourth-quarter settlement, a consumer said.

“Alloys have been picking up slightly after a tough period. But the market is fundamentally pretty balanced right now,” the consumer told Metal Bulletin.

The outlook will also continue to be influenced by currency movements because the South African rand has been volatile in recent months, others noted.

In theory, when the rand weakens, some production costs for producers are lowered, meaning they can tolerate lower prices and when the rand strengthens they compensate for higher costs by raising offer prices.

But South African producers will not always bow to pressure to drop offer prices in response to a depreciating rand, due to ever higher domestic costs in South Africa and the fact that many of their costs are in dollars.