GLOBAL CHROME WRAP: Global ferro-chrome prices dive following China’s lead

Chinese domestic ferro-chrome prices resumed their downtrend on Friday June 2 after major Chinese stainless steel mills declined to announce ferro-chrome price tenders for June.

  • Large Chinese stainless mills decline to announce June ferro-chrome price tenders
  • Chrome ore pricing standoff re-emerges
  • Asian ferro-chrome prices dive amid uncertainty in China
  • European market under pressure, as benchmark negotiations loom
  • US market resists steep declines amid limited inventories

Weak stainless demand undercuts Chinese ferro-chrome pricing
The decision by top Chinese stainless steel mills Tsingshan Group and Taiyuan Iron & Steel (Tisco) to not announce ferro-chrome tender prices in June has put a strain on Chinese ferro-chrome prices, Metal Bulletin has learned.

Major Chinese stainless steel mills traditionally announce their high-carbon ferro-chrome bid prices for June at this time, but the two largest buyers of ferro-chrome in China – Tisco and Tsingshan Group – have said they have enough ferro-chrome for their production needs, citing plans to cut stainless steel production in June following maintenance in May.

Tisco will only purchase from limited domestic suppliers on long contracts and at lower volumes, a trader familiar with the situation told Metal Bulletin.

In a normal month in 2017, Tisco typically purchases 90,000 tonnes of ferro-chrome according to market data. Of which, 80,000 tonnes is purchased from China’s domestic market, while the remaining 10,000 tonnes is acquired from overseas.

Tsingshan Group has also said it would not release a tender price to the market in June, and will purchase lower volumes from long contract suppliers.

It is the second consecutive month that Tsingshan Group has not released a ferro-chrome tender price.

Besides production cuts in May and June, some stainless steel mills have transferred part of their capacity to carbon steel to take advantage of good profits in the carbon steel market and because of weak demand for stainless steel, Metal Bulletin has learned.

Half of the capacity at Tsingshan Group’s Yangjiang facility in Guangdong province will transfer to carbon steel in June, the official said, adding that more than a third of its stainless steel capacity at its facility in Fujian province will undergo maintenance in June.

In a normal month of 2017, Tingshan Group buys 140,000 tonnes of ferro-chrome, according to market data, around half of which is purchased from the domestic market and half from overseas.

However, the official told Metal Bulletin that Tsingshan Group will only require around 80,000 tonnes of ferro-chrome in June.

Additionally, Chinese Southwest Stainless Steel Co transferred one third of its monthly stainless steel capacity to carbon steel in late May, according to an official with the company. Meanwhile Guangzhou Lianzhong Stainless Steel is considering transferring part of its stainless steel capacity to carbon steel, according to media reports.

“In late May and June, it is very difficult for Chinese stainless steel mills to sell stainless steel products, which results in a build-up of stainless steel inventory at the mills,” an official from a stainless steel mill said.

“Stainless steel traders are not willing to buy amid the downturn in prices,” he added.

“The very weak stainless steel demand [in China] has kept stainless steel prices under pressure, while also squeezing prices of ferro-chrome and nickel pig iron,” a Chinese ferro-chrome producer said.

It would not be surprising if stainless steel mills announced tender prices for July at below 6,000 yuan ($881) per tonne towards the end of June or beginning of July, several ferro-chrome traders said.

Tisco and fellow major Chinese stainless steel mill Baosteel offered significantly lower high-carbon ferro-chrome tender prices (6,900-7,100 yuan per tonne) in May compared with the previous month, while Tsingshan Group did not announce a May ferro-chrome tender price.

Metal Bulletin’s price quotation for Chinese domestic spot ferro-chrome, delivered duty paid fell to 6,100-6,400 yuan per tonne on Friday June 2, equal to 69-72 cents per lb, down from last week’s 6,600-6,900 yuan per tonne.

Contract prices for domestic Chinese ferro-chrome were flat at 6,900-7,100 yuan per tonne on June 2.

Meanwhile, Metal Bulletin’s charge chrome index, cif Shanghai slipped to 80 cents per lb, down 1 cent from a week earlier.

Chrome ore price stand off
Metal Bulletin’s UG2 chrome ore index cif China edged up to $148 per tonne on June 2, up $1 from $147 per tonne previously.

Despite the fact that Tsingshan Group and Tisco declined to announce June ferro-chrome tender prices, ferro-chrome producers were still hoping for direction from Chinese steel mill bid prices for further indications on how much they should pay to chrome ore suppliers amid a background of very thin trading in the spot market.

While some offers of UG2 were collected in a range from $160-165 per tonne, actual deal prices held predominantly between $140-150 per tonne.

Metal Bulletin’s price quotation for Turkish lumpy chrome ore (40-42%), cfr China held at $220-240 per tonne.

Ferro-chrome prices weak elsewhere in Asia

The spot high-carbon ferro-chrome markets in Japan and South Korea remained weak, with prices in Japan falling slightly amid lower offers from suppliers.

Metal Bulletin’s price quotation for high-carbon ferro-chrome, cif Japan fell to $0.98-1.05 per lb on June 1, down 2 cents from the prior week’s level of $1-1.07. While, prices for high-carbon ferro-chrome, cif South Korea were unchanged from last week at $0.95-1 per lb on June 1.

“We can hear some offers below one dollar now, while I thought Japanese buyers will not buy now due the uncertainty surrounding future price movements as well as people waiting to see what the Chinese mills tender prices will be,” a major trader in Tokyo told Metal Bulletin last week.

“Japan’s spot ferro-chrome stocks are low and actually demand in the market is not bad,” the trader added.

A second trader reported that a deal of 200 tonnes of material had been concluded at a price below $1 this week, while adding that the average price of this market was around $1-1.05 per lb.

“The market in South Korea is quiet, many are waiting for the Chinese mills’ tender prices,” a trader in South Korea had said, adding that demand in South Korea was less than robust as major mills were expected to cut production in the coming quarter.

“So far, I haven’t heard any prices from India to China as Chinese domestic prices keep falling,” an importer in China said, adding that spot cargoes were being traded as low as 6,200-6,300 yuan per tonne, equivalent to around $0.7-0.72 cents per lb.

European ferro-chrome market under pressure
The European ferro-chrome markets dropped in the past week under pressure from weaker trends in chrome ore and as alloy suppliers cut their offer prices to encourage buying interest.

High-carbon ferro-chrome prices in Europe moved to $1.20-1.30 per lb, off five cents, with a couple of offer prices reported as low as $1.18 per lb.

The refined grades have also dropped, with low-carbon ferro-chrome 0.10% Cr grade now at $2.00-2.10 per lb, from $2.08-2.18 per lb previously, while 0.06% grade was at $2.05-2.15 per lb, from $2.10-2.20 per lb.

An offer below the latest assessed Metal Bulletin price range in 0.10% grade has been reported at $1.94 per lb for 100 tonnes to a consumer in Germany, but nothing has been agreed yet.

Low phosphorous ferro-chrome was also lower at $1.36-1.45 per lb, from $1.37-1.50 per lb. The low phosphorous grade has been more supported in price compared with other ferro-chrome grades in line with demand from special steels producers that require low titanium alloy.

Such steel producers sell their products for use in the oil and gas sectors, which have been performing more strongly, as well as the shale oil sector where companies are drilling more this year.

European ferro-chrome benchmark negotiations upcoming

Benchmark talks for third quarter delivery settlements of charge chrome between South African suppliers and European stainless steelmakers are expected to start in a couple of weeks, with industry sources expecting another fall from the current quarter.

The current benchmark, which dropped 11 cents to $1.54 per lb from the first quarter, may fall 15% for third quarter delivery settlements, according to industry sources.

“Price losses in ferro-chrome markets in Europe and the USA, lower chrome ore prices and the stronger rand suggest a level of $1.30-1.35 per lb for the next benchmark,” a major European dealer said.

The South African rand was around 13 against the dollar on June 2, from about 14 per dollar in early April.

US market resists sharp fall on continued tightness

US high-carbon ferro-chrome spot prices slipped slightly last week to $1.41-1.46 per lb on June 1, down 2 cents on the high end from $1.41-1.48 per lb previously, according to Metal Bulletin sister publication AMM’s latest assessment.

The plummeting global pricing landscape has imposed pressure on the US market, however only minimal declines have been observed at this point.

“We certainly expect prices to soften up, as it is everywhere else, but the market has held relatively stable thus far,” a supplier source told AMM.

“There is not a lot of places you can go for quality material if you need it promptly, so prices have been holding up so far with the market consisting almost entirely of small tonnage, prompt enquiries,” a second supplier source told AMM.

Supply tightness and high priced current stocks have helped keep pricing elevated, but several traders indicated they had received lower priced offers from overseas, particularly with Indian material.

With the market beginning to pick up for third quarter and second half negotiations, market participants suspect that pricing will begin to succumb to downward pressure on long-term and forward deals.

This article was amended on Wednesday June 7 at 16:04 to clarify that although Asian ferro-chrome producers were looking to Chinese stainless steel mill FeCr bids for direction, the two major Chinese stainless steel mills had in fact declined to announce bids for June.