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Sources in the foundry and chemical grade chromite market agree that prices should be on the way up, based on the spike in both demand and prices seen in the metallurgical market.
One market participant said he had increased his offer prices across chemical wet bulk, chemical dried and bagged and foundry wet bulk materials, on reported supply shortages and rises in metallurgical grade prices. “We are aware of supply shortages in South Africa, as well as Europe, and looking at the surge in met grade prices in China, both chem and foundry are currently under-priced,” he said.
But the boom in metallurgical markets – which have ticked up over the course of 2022, followed by a pronounced spike in February – has yet to be fully reflected elsewhere.
The non-metallurgical market is experiencing something of a lull in spot demand, which means that while there has been some recent upward movement in prices, it continues to lag behind, even with higher offers emerging.
“At the current pricing for wet bulk met grade, foundry and chem prices should increase. But there is either no focus by the bigger players or they are tied-in to long-term contracts, because they certainly are selling at prices below met grade prices,” a source at a trading company said. “It is not making sense, but we have not yet seen movements because we expect nothing to change until April for [the second quarter] on foundry prices.”
Indeed, one seller described the non-metallurgical chromite market as “a big disappointment.”
The seller said the market is not moving anywhere: “The main reason the market is not improving is that [some buyers] are screening out met grade [to get] foundry grade.”
Doing so would allow a substantial discount against foundry dried and bagged material on an fob South Africa basis, although in recent weeks the price gap has narrowed between cif China UG2/MG chrome ore and fob South Africa wet bulk foundry grade chromite.
Fastmarkets’ weekly chrome ore South Africa UG2/MG concentrates index, cif China, rose to $208 per tonne, from $202 per tonne previously, in the week to February 22, while its fortnightly price assessment for chromite, foundry, 46% Cr2O3 min, wet bulk, fob South Africa, climbed to $215-230 per tonne, from $215-225 per tonne.
Its fortnightly price assessment for chromite, foundry, 46% Cr2O3 min, dried and bagged, fob South Africa, showed greater movement, meanwhile, climbing to $285-345 per tonne, having remained at $270-320 per tonne since January 11.
But chemical grade material is the more likely of the two to begin to see some of the strength in metallurgical markets, according to the trading company source. “Chem will start to pick up soon, because the producers will just push this into the met markets,” the source said.
Rapid consumption and bullish sentiment have provided support for the UG2/MG market recently, and because its spot market is often more liquid than foundry or chemical grades, this has been reflected in prices, more clearly and more quickly than for other grades.
Prices held steady as 2022 began, with the combination of the Chinese new year holiday and the Winter Olympics – and its attendant environmental controls – keeping liquidity lower, but by the end of January, the upward trend had begun in earnest.
By mid-February, the price had recorded a $17 per tonne increase in a single week, pushing it to $202 per tonne, and putting it at its highest level since July 2018. This was driven by lower inventories in China, strong consumption and a robust downstream outlook, sources told Fastmarkets.
“People have been hanging on to stock for as long as they could, but now they need to replenish,” a trader in Europe said. “They also have to absorb high freight rates and electricity costs, and those things won’t change for the foreseeable future. People are saying, ‘let’s suck it up and get on with it’.”
The sustainability of the upward trend in the metallurgical market will depend on arrivals of cargoes, as well as alloy prices. Alloy prices have remained close to record highs so far in 2022, supported by high production costs, linked in part to high ore prices, as well as robust demand.
Chrome is closely tied to South Africa, which remains the world’s largest producer of chrome ore, and in turn, developments there remain one of the biggest market influences for all grades of the material.
It is a difficult landscape to navigate. The country has been experiencing continuing difficulties linked to the Covid-19 pandemic, including shortages of truck drivers, alongside energy supply issues.
Civil unrest also moved to the forefront of market participants’ minds in recent months, with reports that conditions were markedly more difficult at the beginning of 2022, but in recent weeks logistics have been the bigger challenge. “We’re all suffering a lack of containers. [Material movements at] Richards Bay has been more bulk [than container], but bulk freights are going through the roof as well,” the trader said.
“There are lengthy delays between vessels arriving and being able to berth at port,” a second trader added.
As recently as January, wait times for cargo loading at Richards Bay could be as long as 30 days, according to a third trader – and the longer the delay, the more it costs, he added. “If you’re there with the vessel with a $30,000 per day detention rate,” he said, “you’re looking at $900,000 in detention fees before you even start loading.”