GLOBAL CHROME WRAP: Ore, alloy prices weaken with China’s steel sector
Ferro-chrome and chrome ore prices continued to fall in China on Friday May 5, as the country’s stainless steel market weakened, spreading bearish sentiment to other regions globally.
- Chinese domestic alloy prices drop
- Chrome ore offer prices slashed
- Delayed May tenders cause protracted uncertainty
- European price increase pauses amid China weakness
- USA manages small price gain
Metal Bulletin’s price quotation for spot Chinese domestic ferro-chrome dropped for the sixth week running to 8,500-9,000 yuan ($1,238-1,310) per tonne in warehouse, down 6.4% in a week.
Metal Bulletin continues to assess Chinese contract ferro-chrome prices at 9,600-9,850 yuan per tonne in warehouse, based on April’s ferro-chrome tender prices.
The April price is equal to $1.07-1.10 per lb.
Leading Chinese mills are yet to announce ferro-chrome tender prices for May but market participants expect steep reductions, as consumption will be lower.
Estimates for May’s tender prices have been made either side of 8,500 yuan per tonne.
Some mill sources said they thought they could buy at 8,000 yuan per tonne, while multiple trading sources said they would not be surprised if prices came in lower than 8,000 yuan per tonne.
Mills purchased more than their normal monthly volume in April, meaning they can consume the remainder of their April cargoes in May and buy less fresh material.
Some major mills are expected to conduct maintenance in May due to the weaker stainless steel prices and poor order levels.
As mills warn they will buy less material in May, ferro-chrome producers in China will likely respond by conceding lower prices to place volume where they can, a ferro-chrome market source told Metal Bulletin.
“The longer the mills don’t announce tender prices, the more desperate they think sellers will get. There is less liquidity so domestic Chinese mills all want a piece of the pie,” the source said.
The uncertainty around tender prices is causing further standoff in the chrome ore market as smelters refuse to buy without a better indication of May prices for their own product.
Metal Bulletin’s UG2 chrome ore index, cif Shanghai dropped to $231 per tonne from $320 per tonne previously, as suppliers slashed offers.
Metal Bulletin’s price quotation for Turkish lumpy chrome ore dropped $15 at each end of its trading range to $340-360, cfr China.
“Deal volume in the seaborne ore market won’t increase until Chinese stainless steel mills release their ferro-chrome tender prices for May,” a chrome ore trader told Metal Bulletin.
Some Chinese ferro-chrome smelters are already facing losses, as they are holding raw material priced above $300 per tonne, sources in China warned.
Meanwhile, imported ferro-chrome prices held as producers outside China feel less pressure to sell at unattractive prices, the market source added.
Metal Bulletin’s charge chrome index, cif Shanghai rolled over at $1.12 per lb.
“Supply discipline is still holding among international ferro-chrome suppliers,” the source said.
Still, the weakness in China affected prices elsewhere in Asia and dampened sentiment in Europe, where prices had been rising but have since paused.
High-carbon ferro-chrome prices held in Europe at $1.30-1.44 per lb on a delivered basis.
Further falls in Chinese ore and alloy prices could contribute to a large reduction in the third-quarter ferro-chrome benchmark price, a market participant in Europe said.
“The outlook appears to involve gradually weaker prices for high-carbon ferro-chrome, charge chrome and chrome ore in coming weeks,” the source said.
“If the UG2 chrome ore market falls as much as industry talk suggests then it is fair to say the next quarterly benchmark will be lower, possibly down 10% or more,” the source added.
Metal Bulletin’s price quotation for spot high-carbon ferro-chrome, cif South Korea dropped to $1.1-1.15 per lb on Thursday May 4, down 5 cents at each end of its trading range.
The weak market in China was cited as the major reason for sellers to cut their offers, market sources said.
Metal Bulletin’s price quotation for high-carbon ferro-chrome, cif Japan held at $1.13-1.2 per lb cif Japan on Thursday.
Regional tightness in USA
In the USA, prices recorded a slight gain due to tight supply in the region, even as spot activity remained limited.
High-carbon ferro-chrome traded at $1.42-1.49 per lb in-warehouse Pittsburgh on May 4, up 1 cent at the low end of the trading range, according to Metal Bulletin sister publication AMM’s latest assessment.
“No traders are bringing material in while the market is expected to soften. No one wants to take the risk of being caught with the high priced inventory,” a supplier source told AMM.
“People can talk about the high-carbon ferro-chrome prices coming off all they want, but everything is still going above $1.40 per lb at this point,” the source added.
The regional tightness is insulating the US market from the impact of the dramatic ore price decline in China, sources said.
“The situation in China is messy and there is some weakness on ore, but we are not overwhelmingly affected by that at this point,” a second supplier source told AMM.
“For now, we are optimistic that demand will remain strong overall keeping the supply tight enough to delay any imminent downward spiral on ferro-chrome pricing in the US,” the source added.