UG2 chrome ore market cif China sinks to multi-year low

Fastmarkets’ South Africa UG2 concentrates index, basis 42%, cif China, dropped to $127 per tonne on Friday, its lowest level since April 2016 and down by $4, or 3.1%, from $131 per tonne the previous week.

“The situation is very bad,” a trader said. “Traders are sitting out of the market due to narrow margins, while smelters’ buying appetite has been light despite sellers slashing their offer prices.”

The fall in the value of the South African rand against the US dollar allowed ore producers to lower their dollar-denominated offer prices without harming their margins, which were already tight.

“The softening of the rand means there has been some liquidity on expectations the rand will stay weak,” a producer – having just lowered their offer price – told Fastmarkets.

High portside inventories also weighed on the market at a time of high uncertainty.

“If you want to liquidate material then you have to come down in price, especially as there’s a lot of [material] available,” a trader said. “The market strongly favors buyers at the moment.”

Fastmarkets’ assessment of chrome ore inventories at the main Chinese ports of Tianjin, Qinzhou, Lianyungang and Shanghai narrowed downward by 3% to 3.48-3.64 million tonnes on March 9, from 3.58-3.76 million tonnes on March 2, which was the highest volume since Fastmarkets began assessing them in December 2018.

However, the availability of low-priced seaborne cargoes appealed to some smelters with sufficient cash.

“The market will rebound sooner or later,” a trader said. “When that happens, smelters who produce using today’s low-priced material will earn good profits. Everyone knows this, but not everyone has the money.”

The weakened downstream stainless steel market dampened liquidity for ferro-chrome, which has hit demand for chrome ore, according to market participants.

“We won’t be considering buying no matter if ore prices slid by $3 or $5 per tonne,” a smelter said. “Ferro-chrome stocks are building at our plants, and we have to slow down our production.”

Spot Chinese ferro-chrome prices were steady with only sparse trading ahead of the major stainless steel mills releasing their tender prices for March deliveries.

Fastmarkets’ price assessment for ferro-chrome, spot 6-8% C, basis 50% Cr, ddp China, was 5,700-5,900 yuan ($823-852) per tonne on Friday, unmoved from the previous week.

Market sources expect to see a decline in March’s tenders amid bearish outlook of stainless steel sector.

Imported charge chrome prices flat amid light demand
Fastmarkets’ ferro-chrome 50% Cr import, cif main Chinese ports price stood at $0.69 per tonne on Friday, unchanged since January 3.

“We could not sell any lower than the current price,” a producer said. “I think the current stand-off between buyers and sellers will continue for as long as the coronavirus [outbreak].”

However, a shortage of domestically produced ferro-chrome could emerge in time, he said, which would increase the demand for imported material.

“While demand has been weakened by the coronavirus, the cuts in stainless steel melt rates have not been as severe as those in alloy production,” the producer said. “We expect some tightness to emerge. Realistically, it might take a couple more weeks for this play out before we see more robust demand for imported ferro-chrome.”