GLOBAL CHROME WRAP: Markets skittish ahead of benchmark talks
International ferro-chrome markets were something of a mixed bag on Friday June 16, with sentiment seemingly skittish amid a small recovery seen in China, a stabilisation in the US market, while the downward trend persisted elsewhere in Asia and Europe.
A clearer indication for near-term price direction in world markets should be evident by the end of June before the seasonal slowdown months of July and August, as market participants look to agree third quarter delivery settlements for charge chrome to Europe from South Africa.
- Chinese spot market recovers with consumer sentiment
- UG2 market eases, while Turkish price stabilises
- Tight producer supplies support US spot FeCr market
- ...as Europe slips again ahead of benchmark talks
Metal Bulletin’s price quotation for Chinese domestic spot ferro-chrome basis delivered duty paid stood at 5,700-6,200 yuan ($837-910) per tonne on Friday June 16, equivalent to 65-71 cents per lb, edging higher from the previous week’s assessment of 5,500-6,000 yuan per tonne.
Market sentiment in the Chinese stainless steel sector strengthened in the past week, first in the 200 stainless steel series, which then spread to the 300 series, a Shanghai-based stainless steel analyst said.
As stainless steel prices have stopped falling in China, domestic ferro-chrome producers say they are making losses when their supply prices are below 6,000 yuan per tonne. Most Chinese ferro-chrome producers reported their prices in a range between 6,000-6,200 yuan per tonne.
South African chrome ore miners have been offering higher prices over the past week, compared with a week earlier, which has cemented support for Chinese ferro-chrome producers.
China’s top ferro-chrome producer Inner Mongolian Xinganglian Metallurgy, which has a monthly production capacity of 50,000 tonnes, suffered an explosion at its plant in the country.
However, it is unclear what caused the blast and to what extent production may be affected. The plant supplies about 36,000 tonnes a month of ferro-chrome to major Chinese steelmaker Taiyuan Iron and Steel Group (Tisco), which on June 16 announced a tender price for June at 5,300 yuan per tonne.
The spot high-carbon ferro-chrome markets in Japan and South Korea have dropped again in the past week, with buyers sidelined ahead of the announcement of the European charge chrome benchmark.
Metal Bulletin assessed the spot high-carbon ferro-chrome price in Japan at $0.85-0.90 per lb cif Japan on June 15, from $0.90-1.00 per lb from the week before.
The spot price in South Korea was assessed at $0.80-0.85 per lb cif South Korea, down from $0.85-0.90 per lb previously.
China’s Baosteel Stainless announced its long-awaited June tender price, with the level down as low as $0.62 per lb.
Two deals in Japan were reported at $0.89 and $0.87 cif Japan, respectively, with offers from India reported at as low as $0.85 cif Japan.
Long-term contract, charge chrome
The Chinese long-term contract ferro-chrome price range has widened after Tisco announced its ferro-chrome tender price for June. Metal Bulletin’s price quotation for Chinese domestic ferro-chrome on contracts was assessed at 5,300-6,300 yuan per tonne on June 16, down from 5,500-6,300 yuan in the previous week.
“We can get cargoes at this price on long contracts [...] we have 60,000 tonnes of long contract supplies each month,” a company official said.
China’s import charge chrome market has increased in price in line with business sentiment in the Chinese stainless steel sector. China import charge chrome (50% Cr index basis duty unpaid) was $0.71 per lb, from $0.70 per lb.
Increased world nickel prices, with the London Metal Exchange cash price up to $8,900 per tonne, from $8,700 per tonne, in the past week, and firmer fundamentals, has underpinned steel market sentiment, according to industry sources in China.
Meanwhile, South African charge chrome producers are considering production cuts because bid prices from Chinese steel mills are falling below operating costs in South Africa.
The South African UG2 chrome ore price fell on June 16 amid low key buying interest in China. Metal Bulletin’s UG2 chrome ore index dropped $2 to $138 per tonne cif China.
However, the Turkish chrome ore market has held at around $230-250 per tonne, with producers there reluctant to cut their offer prices close to $200 per tonne. Chrome ore stock levels in Chinese ports are at a high level – around 2.5 million tonnes.
US stability only temporary
The US high-carbon ferro-chrome market stabilised in the past week, as the country persisted in bucking a general downward trend in prices seen in most of the rest of the world, but prices may be dragged lower.
Spot prices for US high-carbon ferro-chrome increased at the bottom end of its trading range, and off a cent at the top, to $1.40-1.45 per lb on June 16, from $1.37-1.46 per lb a week earlier, according to Metal Bulletin sister publication AMM’s latest assessment.
The market saw a flurry of spot enquiries, although they were limited in volume. Limited stock levels and a shortage of supply options for prompt material has supported prices.
“We have a market in high-carbon ferro-chrome where material is bottled up by a few producers and suppliers, with very little customer base left on the spot,” a supplier source told AMM.
“Whatever small business there is there aren’t many options for prompt supply [...] so we are continuing to see numbers in the $1.40’s [per lb],” he said.
“None of the traders wanted to buy when numbers were going up, so no one really has much cheap material around,” another supplier source said. “So outside of what a few traders have purchased from the DLA [US Defense Logistics Agency], outlets for prompt material are essentially limited to the producers.”
Still, industry sources reckon a price correction lower is inevitable as the current 20 cent per lb gap between the US and European market is not sustainable. US dealers said lower import offer prices have already been seen and that a correction in the US market should follow.
US low-carbon ferro-chrome market prices have been mostly unchanged. Spot prices for 0.10% carbon ferro-chrome have narrowed to $1.98-2.02 per lb, from $1.97-2.03 per lb previously, according to AMM’s latest assessment.
Market participants said an increase in OCTG (oil country tubular goods) was essential to drive consumption in refined ferro-chrome grades in the USA. OCTG are metal tubes that are used in oil and gas production, which involve drill pipes, casing and tubing and are used both onshore and offshore.
Europe drops, awaits benchmark talks
In Europe, prices dropped in standard high-carbon and refined grades, with market sentiment cautious ahead of third quarter settlement talks expected to start in coming days.
One supplier reported doing deals “between $1.90 and $1.95 a lb”, while others said they are prepared to offer at $2.05 per lb, but drop to no lower than $2.00 per lb. Metal Bulletin’s assessed 0.06% grade dropped five cents to $2.00-2.10 per lb, while low phosphorous (P max. 0.015%) grade dropped a few cents to $1.30-1.40 per lb.
Market trading on a spot basis is expected to be quiet ahead of imminent talks between charge chrome producers in South Africa and consumers in the European steel sector.
Metal Bulletin’s ferro-chrome benchmark indicator suggests that the price would be $1.14 per lb, if settled on June 16, one cent lower than the previous week’s indication but well down on the current benchmark of $1.54 per lb, which dropped 11 cents from the first quarter.
Meanwhile, in a research note in the past week, investment bank Jefferies expects the benchmark to fall further to $1.10 per lb in the fourth quarter.
“The European ferro-chrome market is very cautious,” one trader told Metal Bulletin.
“Indian ferro-chrome alloy (3% Si) is available at $1.00 per lb, which some European customers are being offered for July and August, and if they want it in September they can get it at below $1.00 per lb.”
One major European consumer said he had met many ferro-chrome suppliers at a June industry event in Germany where he was offered high-carbon alloy as low as $1.10 per lb.
“The benchmark may be as low as $1.00-1.10 per lb for the third quarter, particularly given that charge chrome is being offered at $0.62 per lb in China,” the consumer told Metal Bulletin.
In terms of production, Finnish ferro-chrome producer Outokumpu will cut its charge chrome production (54-55% Cr) by about 16,000 tonnes from June 23, shutting down a furnace at its Tornio, Finland plant for planned maintenance and repairs.
In addition, Swedish ferro-alloys producer Vargön Alloys is running at less than half of its total annual ferro-alloys production capacity, while its Turkish owner Yildirim Group will decide by the end of this month it if will cut up to a quarter of its chrome ore and ferro-chrome production in the third quarter of 2017.
Yildirim has the capacity to make about 550,000 tpy of high-carbon ferro-chrome across three countries where it operates: Turkey, Sweden and Russia.