Chromium prices jump 25% on severe supply shortage

A severe shortage of chromium, along with firm downstream demand, has caused prices of the metal to hit their highest level in almost seven years.

Metal Bulletin’s weekly price assessment for in-warehouse chromium soared 25% to $13,250-13,995 per tonne on Friday April 6, from $10,500-11,300 per tonne the week before. The price was last seen at $13,000-14,000 per tonne in June 2011.

“It is a perfect storm coming out of the blue,” a producer said. “The situation is not easing up as there isn’t enough material for the second quarter.”

A restructuring in the way chromium metal from Russia is being sold is also adding to supply constraints, the producer added in reference to an offtake deal between Yildirim Group subsidiary Polymetcore Trading and Midural’s Kluchevsky Ferroalloy plant.

There has been a shortage of chromium material in the spot market since Turkish industrial conglomerate Yildirim Group signed a seven-year offtake agreement in December 2017 to market chrome metal produced by Russia’s Midural Group through its Swiss trading subsidiary Polymetcore Trading.

In addition to tight supplies, chromium prices are also being lifted by robust demand created by the boom in the oil and gas, and aerospace industries, market sources said.

The oil price has been soaring since the fourth quarter of 2017 and the first month of 2018, when oil prices hit $71 a barrel for the first time in more than three years. At the time of writing, the Brent crude oil price was $69.54 per barrel.

Chromium is used widely in steel tubing in oil and gas wells. The metal’s compounds are also used in oil industry drilling fluids, such as deflocculants.

The higher US military budget for 2018 also suggests there will be growing demand from aerospace equipment manufacturers. Chromium is commonly used in the industry’s coatings and finishes.

This year’s US military budget includes $589.5 billion for the Pentagon and another $65.2 billion for overseas operations. This marks a $61.1 billion increase from the 2017 budget and is $80 billion above the spending caps in force since 2011.

Fundamentals support
Rising raw material costs are also contributing to the rise in chromium prices, according to a trader.

Industrial Minerals assessed the weekly price of chemical-grade chromite at $285-340 per tonne fob South Africa on April 3, steady with the previous assessment, compared with $250-270 per tonne at the beginning of the year.

“There is an increase in the cost of chemical grade chromium ore,” the trader said. “Ore sources are limited because of the quality needed to produce the chemicals.”

A second trader said downstream demand for chromium chemicals for all applications was high and costs were increasing.

“There has been a cutback in sodium dichromate in Argentina, which is the mother chemical from which all chrome chemicals are produced, such as chrome oxide, chromic acid and basic chrome sulphate,” he said. “This has put pressure on all other prices and chemicals.”

The leather tanning industry is the largest user of chromium chemicals, followed by the metal finishing industry, in which the various applications for chromium chemicals include decorative chromium plating, hard chromium plating for engineering requirements and pickling of plastics, which is also a function of metal finishing.

Chromium chemicals are also widely used for pigment applications, in which they are sometimes mixed with other elements.

Meanwhile, a third trader said high aluminium prices on the London Metal Exchange were also pushing up chromium prices.

“The news of sanctions on Rusal will only serve to fuel the fire,” he said. “Chrome metal uses aluminium as the reducing agent in the process and every $100 per tonne change in the aluminium prices will move chromium metal prices by around $60 per tonne.”

The United States Treasury announced on Friday April 6 that it had sanctioned and frozen the assets of Oleg Deripaska and UC Rusal.