“We are looking into setting up [delivered duty-paid ferro-chrome] delivery into Europe and how to make that profitable,” said the source, who anticipated starting exports into Europe in the second quarter of 2019.
Fastmarkets’ price for high-carbon ferro-chrome imported into Europe has lost 23.7% in three months to $1.0-1.03 per lb on November 30 from $1.27-1.40 per lb on August 31, 2018.
This price fall makes the European ferro-chrome market relatively unattractive compared with other mainstream consumer markets, such as China. Some producers had anticipated flows of Indian material into Europe to slow with the price slipping toward $1 per lb and be diverted to China, where India exporters have much lower freight costs.
“It makes sense that Indian material will start to push into China now that the arbitrage with Europe has disappeared,” a producer of non-Indian material said. “Normal economics will start to play itself out.”
One trader of Indian material into Europe speculated that this might already be happening.
However, the Indian exporter stated profits could still be made in Europe even at the current relatively low prices – and therefore it would remain an attractive destination in the longer term.
Indian material is marketed at a discount of around 13 or 14 cents per lb to on-spec material, according to multiple sources.
“Indian material would still be profitable at [the on-spec Fastmarkets high-carbon price of] $1.02 per lb delivered duty-paid,” the Indian source said.
Most Indian ferro-chrome exports into Europe have a silicon content of 3%, which is higher than the Fastmarkets specification of 1.5% and requires further processing. Therefore, Indian material cannot command the price of on-spec material.
Reported sales of Indian material are not included in assessments of the Fastmarkets price. However, Indian volumes have still had a bearish impact on the market in the latter half of this year because the material can be blended and used with on-spec material, which made it attractive when on-spec material prices were higher.
European potential as a market
The recent increase in Indian exports into Europe has been motivated by more than the desire to switch to a market offering improved profits in the short term.
Indian producers have been establishing themselves in Europe at the same time that China ramps up its own domestic ferro-chrome production, according to the Indian export source.
“China is slowly becoming self-sufficient in ferro-chrome so Indian producers don’t have any choice but to turn to Europe,” the source said. “Two or three years down the line this will be true of all big and small sellers of Indian ferro-chrome.”
Recent price drivers
Part of the downward pressure on the European ferro-chrome price seen since the end of August was the result of increased volumes of Indian material into Europe. At the same time, established sellers have been competing fiercely to maintain their market share.
While Indian sellers may still see Europe as a profitable market even in the current low price environment, buyers have shown less interest in Indian material as the market has dropped.
“Customers want low-silicon material rather than Indian imports,” the trader said. “Liquidity in high-silicon is now terrible – I have been surprised that Indian exports have not been competing more seriously.”
Indian high-carbon ferro-chrome producers will continue to target the European market in 2019 and beyond despite a recent softening in prices, according to an Indian exporter who is establishing trading connections to European destinations.