GLOBAL CHROME WRAP: Alloy prices diverge further between China and other regions; UG2 keeps rising
Chinese ferro-chrome prices continued to rise on Friday June 30 as all other global markets flatlined or weakened.
• Chinese domestic and imported ferro-chrome prices rise
• Tender prices increases anticipated for July
• Ore prices continue higher
• European alloy prices inch lower after benchmark drop
• Prices weaken more slowly in the USA amid tight availability
Domestic and imported spot ferro-chrome prices both increased by 6.70% week-on-week in China.
Metal Bulletin’s price quotation for domestic Chinese ferro-chrome reached 7,000-7,400 yuan ($1,032-1,091) per tonne, on a duty paid, delivered basis.
The increase in spot prices has led to predictions that Chinese mills will have to release higher tender prices for July, as stainless steel orders and prices increase.
Most said they expected July tender prices in the range 6,800-7,000 yuan ($1,003-1,032) per tonne, equal to 77-80 cents per lb.
“The tender price definitely should rise given the spot price has risen to more than 7,000 yuan per tonne,” a domestic ferro-chrome producer told Metal Bulletin.
“At around 7,000 yuan per tonne, Chinese ferro-chrome producers can make some profit, but the market consensus is that it will be very hard to break 7,000,” the source added.
Metal Bulletin’s charge chrome index, cif Shanghai reached 80 cents per lb.
Although mills have been prioritising cheaper local cargoes whenever possible, some Chinese stainless steel mills purchased South African cargoes as they received more orders for stainless steel, a ferro-chrome trader said.
In the absence of further signals from mills, Metal Bulletin’s price quotation for domestic Chinese ferro-chrome on contracts rolled over at 5,300-6,300 yuan per tonne.
Metal Bulletin’s price quotation for South African UG2 chrome ore rose to $169 per tonne, from $164 per tonne a week previously.
“Chrome ore has made a dramatic turn and will continue to do so as the large producers have healthy balance sheets and can leave tonnes on the ground as opposed to allowing depressed pricing to happen again,” a chrome supplier outside China said.
Metal Bulletin’s price quotation for Turkish lumpy chrome ore (40-42% Cr) rose to $245-265 per tonne, compared with $235-255 per tonne a week previously.
Elsewhere in Asia, prices held for the second consecutive week but sentiment continued to strengthen amid the price uptick in China.
Sources in Japan and South Korea reported that Indian ferro-chrome producers - major suppliers to their markets - have already raised their offer prices to China.
Metal Bulletin’s price quotation for spot high-carbon ferro-chrome, cif Japan held at $0.85-0.90 per lb on Thursday June 29.
“Overall stocks of high-carbon ferro-chrome in Japan are low, so I think the price has fundamental support,” a trader in Japan said.
Metal Bulletin’s price quotation for spot high carbon ferro-chrome, cif South Korea, was flat at $0.80-0.85 per lb.
“Though no major deals have been heard, I feel market sentiment remains firm this week,” a major trader in Seoul told Metal Bulletin, adding that no cargoes were available below $0.80 per lb during the week.
In Europe, the ferro-chrome spot market continued to weaken in the wake of the 30% drop in the quarterly benchmark price.
Metal Bulletin’s price quotation for high-carbon ferro-chrome, delivered in Europe dropped to $1.10-1.15 per lb, compared with $1.12-1.22 per lb the previous week.
One supplier pointed out that high quality ferro-chrome can still fetch high prices in the spot market.
“High grade stocks are balanced and high grade producers have no need to dump material,” the source told Metal Bulletin.
“In today’s world it is important to understand that the correlation between spot prices and the benchmark is becoming less and less. There are no golden rules with regard to that spread,” the source added.
Prices inched lower in the USA, falling much more slowly than in other regions, due to limited spot activity and low stocks.
Traders’ inventories have shrunk, reducing competition and granting the few large suppliers considerable pricing power.
Spot prices for high-carbon ferro-chrome, in warehouse Pittsburgh slid to $1.39-1.45 per lb on June 29, down 1 cent on the low end, according to Metal Bulletin sister publication AMM’s latest assessment.
“Right now there is zero reason for large high grade producers to be selling to traders unless they are getting $1.40 and above. There is no need to create a competitor who can undercut them,” one supplier source told AMM.
Market participants also noted that the European benchmark drop had little to no effect on US prices.
“I don’t see the benchmark having a negative impact in pricing in the USA unless we start seeing some cheaper imports making their way,” a second supplier source told AMM.
Still, market participants agreed that prices will correct downward eventually, but they could not say when it would happen.
“Inevitably the price level will go down but for now the suppliers in the USA are going to sit back and watch what plays out,” the first supplier source said.
“At some point something will be sold cheaply and the large suppliers will adjust, but they will not be the ones to make that downward move first,” he added.