Ferro-chrome markets prepare for another year of uncertainty in 2024

With 2023 coming to a close, spot activity in European ferro-chrome markets has begun to dwindle, with the traditional period of year-end destocking underway, sources told Fastmarkets on Tuesday December 19.

Fastmarkets’ weekly price assessment for ferro-chrome high carbon 6-8.5% C, basis 65-70% Cr, max 1.5% Si, delivered Europe remained at $1.69-2.08 per lb Cr on Tuesday, and its weekly price assessment for ferro-chrome high carbon 6-8.5% C, basis 60-64.9% Cr, max 3% Si, cif Europe held at $1.00-1.10 per lb Cr.

But various challenges have plagued both steel and alloys markets over the course of the year, in terms of cost of production, the wider macro-economic backdrop and also natural disasters.

For example, demand has reportedly been depressed for much of the year, with Zimbabwe-focused ferro-chrome producer Zimasco recently shutting two of its furnaces, citing the depressed market, as well as production costs and especially electricity.

Bearish sentiment was becoming established by May, and in March, Merafe Resources, which operates a chrome joint venture with Glencore in South Africa, had already said in its annual report for 2022 that energy insecurity and the risk of a global recession would make 2023 a challenging year.

And earlier in the year, the major earthquakes affecting Turkey and Syria led Turkish ferro-chrome and chrome ore producer Eti Krom to temporarily halt all chrome and ferro-chrome shipments.

Fresh challenges have also arisen in recent days, with new sanctions against Russia announced by the EU, including import restrictions on ferro-alloys, as well as reports that major shipping lines have begun to divert vessels away from the Red Sea and the Suez Canal, after attacks on commercial vessels by Houthi rebels in Yemen.

The shift away from the Red Sea has affected material coming from India — a key production hub, mainly for ferro-chrome with 60-64.9% chrome content — since supplies are shipped via this route.

Meanwhile, the latest EU sanctions against Russia are expected to have an effect on low carbon ferro-chrome supply in particular, which has historically been heavily supplied by Russia into Europe — although the scale of that effect is as-yet unclear.

Fastmarkets’ fortnightly price assessment for ferro-chrome 0.10% C, average 65-70% Cr, delivered Europe was $2.34-3.10 per lb Cr on Tuesday, up 2.64% from the previous assessment, but sources suggested this was unlikely to be a direct result of the sanctions announcement, with the full effect of the sanctions only expected to be visible from 2024 onward.

Overall, 2023 has been a year characterized by instability — and that is likely to persist, according to market participants.

“It’s uncertain, maybe even more uncertain than this year, I would say,” a supply-side source in Europe told Fastmarkets.

EU announcement of 12th package of sanctions against Russia

On Monday December 18, the EU confirmed it had formally adopted its 12th package of sanctions against Russia, which included new import restrictions on ferro-alloys, with the full text of the latest legislation published later that day.

Goods falling under CN code 7202, which refers to ferro-alloys, are now included in article 3i of the sanctions, which “prohibits the purchase, import, or transfer, directly or indirectly” into the EU of specified goods, if they originate in Russia.

City, Landscape, Nature

In some quarters, there has already been a negative reaction to the latest package, especially where it relates to semi-finished steel products, with European steel association Eurofer branding it a “historic mistake.”

And sources in the ferro-chrome market have disagreed on whether the new restrictions are likely to have a major impact on ferro-chrome markets in Europe, and especially low-carbon ferro-chrome, with some suggesting it could cause a major supply disruption, while others have said demand has been so poor that it may only have a limited impact.

One source suggested the move could mean needing to find as much as 40,000 tonnes of replacement low-carbon and medium-carbon ferro-chrome in Europe, but in the absence of demand, others have said there is unlikely to be much upward pressure.

“[I think] we should expect prices to skyrocket during the transition period,” a seller told Fastmarkets during the final pricing session of the year.

“For now, low-carbon prices are [stable], but over the next few weeks, especially from mid-January onward, I expect a major increase,” a second seller said.

On the other hand, a trader said they did not see any real support for prices, and that the likely effect of the sanctions remained unclear.

“I don’t see strong demand in January. What’s going on is a truckload here [or there] for the first week. No one is coming to say, ‘let’s agree on the first quarter.’ That’s not what’s happening at all,” the trader said.

“The sanctions should have an effect, but it’s brand new — we will see [later] how the market is reacting on that,” they added.

On the buy side, one source said they had already largely eliminated Russian supply.

“We’ve seen nothing from Russia at all for well over a year — 18 months at least. We haven’t brought it in,” the buy-side source said.

There was agreement, meanwhile, that greater clarity was only likely to emerge from January.

Shipping diversions around Red Sea and Suez canal affect Indian cargos
Throughout 2023, market participants in Europe have had a close eye on material coming from India, with ongoing reports that larger volumes of higher grade material — both low and high carbon — were arriving in Europe from the country.

“Looking at last year compared to this year, looking at India, what I’m seeing is that there’s quite a lot of capacity in the pipeline in terms of ferro-chrome smelters,” Teboho Sebetlela, manager, steel alloy markets, at global consultant Wood Mackenzie, told Fastmarkets.

“In India, we are currently aware of nine projects in our base case and probable categories, amounting to just under 1 million [tonnes per year] of capacity.”

This is more on the high-carbon than the low-carbon side, according to Sebetlela.

“I would expect that, given the reasonably good global outlook for chromium going to automotive, aerospace, defense and other value-added applications, there would not be [excess] capacity for low carbon,” he said.

Robert Cartman, Fastmarkets senior metals analyst, agreed.

“For the time being, India has the production capacity to [put] out more ferro-chrome if there is demand for it,” Cartman said.

“While [actual] production is likely around 1.4 million tonnes [overall], production capacity at present is just over 2 million tonnes. Perhaps around a third of this is largely integrated and used by stainless steel mills, but that still leaves some 1.5 million tonnes of floating merchant capacity, more or less,” he added.

Demand in Europe would play a part, as well as price levels and raw materials available in India, Sebetlela and Cartman said.

But beyond this, in recent days, the backdrop for material coming from India into Europe has dramatically changed.

Following the attacks on commercial vessels in the Red Sea by Houthi rebels in Yemen, major shipping lines have reportedly now begun to divert vessels away from both the Red Sea and the Suez Canal, around the Cape of Good Hope, potentially increasing freight costs and creating long delays.

This means it is now significantly more difficult for material to be shipped, from India in particular, and also possibly from China, to Europe, sources have told Fastmarkets, since such material has historically come via this route.

“We are not able to offer to Europe,” a supply-side source in India told Fastmarkets. “Liners have stopped shipment to Europe. Liners will carry Indian cargo from an African route instead of the Red Sea, so [there may be an] increase to the ocean freight.”

Newswires have reported that companies including Maersk, Lloyd-Hapag, CMA CGM and MSC have changed routes to avoid the Red Sea in recent days.

There may at least be scope for production to be directed elsewhere, or indeed toward domestic consumption.

“Although the demand outlook is quite weak for Europe, the main export destinations for Indian output of high-carbon ferro-chrome are China and the rest of Asia. In China, there will be meaningful demand growth in the next few years. However, given that this demand is being accompanied by substantial build-up of new, cost-competitive capacity domestically, it does not necessarily provide much of a growth opportunity for Indian exports,” Sebetlela said.

“Currently, India aims to increase total crude steel capacity, including crude stainless steel, to 300 million tpy by 2030, which would amount to a 140% increase from 2022 production. We believe that much of India’s ferro-chrome capacity growth will need to be directed toward growing domestic consumption,” he added.

Environmental, social and governance still high on agenda

Across the market, ferro-chrome producers, and indeed steel and other alloys producers, have continued to focus on environmental, social and governance (ESG) concerns in 2023.

Throughout the year, companies involved in the ferro-chrome market in various capacities — including Outokumpu, Vargön Alloys, Tata Steel Mining, Jindal Stainless, Glencore, ERG and TELF — have voiced their commitment to decarbonization and combating climate change.

Outokumpu, for example, recently announced it had invested €30 million ($32.9 million) in a pelletizing plant for biocoke production — a non-fossil fuel alternative to traditional coke — in Tornio, Finland.

The facility will pelletize externally sourced biocarbon into biocoke at the site in Tornio, with an annual capacity of 25,000 tonnes, with production scheduled to start in mid-2025. The aim is to reduce CO2 emissions by 82,000 tonnes, Outokumpu said.

And now that the Carbon Border Adjustment Mechanism (CBAM) has entered its transition phase, this focus is likely to persist, with customers in the EU expected to turn to options with lower carbon emissions while they look to meet their reporting requirements, one source on the buy side suggested.

But there has been some skepticism over how successful CBAM will be.

“CBAM is a very noble concept on paper. One can picture how it might work in other markets, but for ferro-chrome, I think European consumers are going to find themselves in a difficult position to enforce CBAM in such a consolidated market. We will have to wait and see,” Sebetlela said.

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