GLOBAL CHROME WRAP: Chinese outlook divided on upcoming tender prices; US, EU markets stable amid slowdown [CORRECTED]
Spot prices for ferro-chrome have fallen slightly in China as the market awaits August tender price announcements from the main stainless steel mills.
- Domestic and imported prices weaken in China’s spot market
- Divergence in August tender prices outlook on uncertain stainless steel price and environmental checks
- Chrome ore and ferro-chrome imports into China slump in June
- South Korean market on the rise
- UG2 prices dip on big inventory in ports and traders’ hands
- European market plagued by inactivity
- US market quiet, but maintains pricing premium
Spot high-carbon ferro-chrome prices edged lower in China on Friday July 21 on expectation of increased supply and the rebound in ferro-chrome price since June as well as uncertain stainless steel prices.
Metal Bulletin’s price quotation for Chinese domestic ferro-chrome in the spot market edged down to 7,000-7,200 yuan ($1,036-1,066) per tonne on Friday, from 7,000-7,400 yuan per tonne previously.
The domestic spot price is equal to 80-82 cents per lb.
“The rebound in ferro-chrome prices since June has prompted more supply from Inner Mongolia, Hunan province and Guizhou province, which are ferro-chrome producing hubs in China,” ferro-chrome traders in China said.
“Some producers in Hunan booked more ores two or three weeks ago, when July ferro-chrome tender prices were released,” chrome ore traders added, “with the intention of producing more in the coming months.”
However, latest import figures show that overall imports of ferro-chrome and chrome ore into China slumped in June, down 37% and 17% year-on-year respectively. More on the latest import statistics, here.
Metal Bulletin’s charge chrome index, cif Shanghai, was stable at 83 cents per lb on Friday.
Metal Bulletin’s price quotation for Chinese domestic ferro-chrome on contracts stayed level with last week’s range at 6,800-7,000 yuan per tonne, with August tender prices from stainless sector due to be released in the next two or three weeks.
The domestic contract price is equal to 77-80 cents per lb.
Uncertain August tender prices on unclear stainless steel price and environmental check results
Forecast for August’s ferro-chrome tender prices diverged because of uncertainty over Chinese stainless steel prices.
Some market participants noted that lower spot prices, ample supply and stagnant Chinese stainless steel consumption suggest stainless steel mills will slightly lower August tenders.
“We assume the Tsingshan Group and Baosteel’s tender prices for August will be 6,500-6,800 yuan per tonne, slightly lower than July’s 6,800 yuan per tonne,” said one market participant.
Other sources also expected eastern China’s August tender prices to be in the 6,500-6,800 yuan per tonne range.
“We have ferro-chrome supply from Inner Mongolia, and we also purchased several cargoes in June and July, so we are not in a hurry to decide a tender price,” an official from the biggest stainless steel producer in Northern China said.
“Although stainless steel prices and orders both improved from second half of June, the Chinese real estate industry is still quiet so final consumption is not picking up,” a senior stainless steel analyst based in Shanghai said.
“Most of late June’s orders are scheduled to be delivered in late July, which will raise some concerns over stainless steel supply and stainless steel prices,” the analyst added.
“If the stainless steel price’s upward move can’t be sustained, why would these mills give higher tenders to ferro-chrome producers,” the analyst concluded.
Others cited still-rising stainless steel prices, possible environmental checks in Hunan and Guizhou province, and the quiet winter season in South Africa to suggest stainless steel mills are likely to lift August ferro-chrome tender prices.
“Chinese stainless steel prices will continue to rise as Wuxi and Foshan stainless steel inventories are still at low levels; the stainless steel traders’ restocking is far from over,” a main overseas ferro-chrome supplier said.
“It is also reported that Chinese environmental monitoring groups arrived in Hunan and Guizhou provinces towards the end of the week. It is not certain whether the checks will affect ferro-chrome production, but Eastern China’s stainless steel mills will be wary of that,” a ferro-chrome trader said.
“The South African winter is a quiet season for producing or exporting ferro-chrome, we can’t count on South Africa to export more in the low season,” the trader added.
The price trend of Chinese stainless steel and China’s forthcoming environmental checks in Hunan province and Guizhou will be two crucial factors affecting August’s ferro-chrome tender prices.
South Korean market edges higher
The spot high-carbon ferro-chrome market in South Korea and Japan remained stable to firm this week, with South Korean prices rising further.
The Metal Bulletin assessed spot high-carbon ferro-chrome price was at $0.85-0.90 per lb cif South Korea on Thursday July 20, up 2-4 cents from a week ago; while the Japanese price remained unchanged at $0.85-0.90 per lb cif Japan in a quiet market.
“The South Korean market still is rising this week, although some weakness is heard in the Chinese market,” one of the major traders in Seoul told Metal Bulletin.
A mill was heard to have opened a 100-tonne tender this week and most offers it received were in a range of $0.85-0.89 per lb cif South Korea; only one offer was heard at $0.82 per lb cif South Korea.
“Normal offer levels in the market are around $0.90 per lb [cif South Korea]; I am afraid the price may move down in the near term if the Chinese market falls further,” a second trader said.
The Japanese market remained quiet this week, with low demand during the summer holidays.
“Demand in Japan is usually low from July to September as mills have already stocked cargo in April, May and June,” a major trader in Japan said.
UG2 prices dip on large inventories
The UG2 index was down on Friday July 21 on lower spot ferro-chrome prices and still-huge stocks at Chinese ports.
Metal Bulletin’s UG2 chrome ore index, cif China dropped $2 to $167 per tonne.
“The lower spot ferro-chrome price has put pressure on UG2 prices, and trading is thin as the market waits for China’s stainless steel tender prices,’’ a main ferro-chrome producer in Shanxi province said.
The port of Tianjin’s fot price for UG2 stood at 33 yuan per dmtu, according to sources, slightly down from previous weeks.
China’s total chrome ore inventory stood at 2.481 million tonnes on Friday July 22, up 22,000 tonnes from the previous week, and up 61,000 tonnes from one month ago.
The large inventories held by traders will put pressure on chrome ore prices, sources said. However, imports have fallen in June.
Speculative traders who have been driving a rally-and-crash cycle in manganese ore for many months have built up at least half a million tonnes of chrome ore and appear poised for a new squeeze, Metal Bulletin reported.
Turkish chrome ore (40-42%) is being offered at $270-280 per tonne, up $10 on the low end.
European market stable amid inactivity
The European ferro-chrome market for high-carbon alloy was unchanged in the past week, extending a steady trend from the week before as suppliers look to cement a price floor after a run of losses in May and June.
Metal Bulletin’s spot price range for high-carbon ferro-chrome was $1.10-1.18 per lb, delivered in Europe, on Friday July 21.
Actual trade has been at a nominal level as most dealers take holiday during the northern hemisphere summer, while consumers are shutting their mills for maintenance programmes and relying on longer-term intake contracts.
“It is likely that the rest of July – and possibly early August – will be a slow time for ferro-chrome trading, with activity picking up towards the end of next month,” a trader said.
Traders in Europe indicated there is no consumer interest in building their stock levels until September, although there is inter-merchant buying interest in buying refined ferro-chrome for blending purposes.
Traders are reportedly open to fourth-quarter business for refined alloy, but European producers have adequately judged their stock levels in the near term and do not need to sell below current spot market price ranges.
US market maintains pricing premium
The US high-carbon ferro-chrome market remained largely stable, as prices continued to hold at massive premiums to overseas markets.
Spot prices for US high-carbon ferro-chrome were assessed at $1.38-1.46 per lb on July 20, down 1 cent on the high end from $1.38-$1.47 per lb previously, according to Metal Bulletin sister publication AMM’s latest assessment.
The spot market has continued to slow down considerably as the summer progresses, as spot transactions have been minimal.
“The spot market is still somewhat quiet, but overall demand has remained very strong,” a supplier source told AMM. “Contract business is in a very steady state and there are not really any issues from consumers right now.”
Healthy offtake from mills on contracts has kept suppliers from feeling pressure to sell cheap, while the limited spot market demand has deterred would-be importers.
“There is not a huge spot market, so if you don’t have material the risk of taking a position is not worth the reward,” a second supplier source told AMM.
“The people bringing material in already have contracts, so there is nothing flooding into the spot market to impose pressure,” a third supplier source said.
“The spot market doesn’t really have liquidity, so no one is going to be willing to stick their neck out to disrupt it right now.”
[This article was updated at 11.39 on July 26 due to a price correction.]