COMMENT: Debate over G13 can only grow

2012 is turning into the year of the pricing syndicate: tin in Indonesia, silico-manganese in India, cobalt in China, and now ferro-chrome.

2012 is turning into the year of the pricing syndicate: tin in Indonesia, silico-manganese in India, cobalt in China, and now ferro-chrome.

When the Chinese ferro-chrome smelters and traders that make up the group known as G13 meet to discuss the market, they also discuss the level at which they will offer ferro-chrome in the domestic market, they told Metal Bulletin last week.

They rejected the suggestion from western suppliers that they also acted in concert on chrome ore bid prices, though.

As Metal Bulletin observed in the context of the Indonesian tin smelter consortium that the market saw earlier this year, there is an elementary truth about pricing syndicates.

That is, they are hard to maintain because individual companies at certain points will always fare better as individuals than supporting the syndicate line.

G13 members told Metal Bulletin that while they met regularly and came up with a collective idea of ferro-chrome offer prices in China, they sometimes find it hard to make it stick for all kinds of reasons.

To companies in China, this kind of alliance represents a natural way of aligning the needs of one particular sector with the country’s industrial development.

To their counterparts outside, it looks like an anti-competitive group, which impedes free trade.

For the moment, as one analyst in China put it, “the G13 is too young to control the market”.

But as China’s significance in markets such as ferro-chrome continues to develop, the debate and high feelings about pricing syndicates are sure to grow.

Alex Harrison
aharrison@metalbulletin.com
Twitter: @alexharrison_mb

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