High-carbon ferro-chrome prices in Europe rise further on tighter supply
The market for higher grades of high-carbon ferro-chrome in Europe rose strongly in the week ended Tuesday February 9 due to a shortage of available material while suppliers focused their attention on Asia.
Fastmarkets’ price assessment for ferro-chrome, high carbon, 6-8.5% C, basis 65-70% Cr, max 1.5% Si, delivered Europe, rose by $0.03-0.07 per lb (1.8%) on Tuesday to $1.10-1.22 per lb Cr, from $1.07-$1.15 per lb Cr on February 2.
The corresponding price for ferro-chrome, high carbon, 6-8.5% C, basis 60-70% Cr, max 1.5% Si, delivered Europe, rose by a similar amount and percentage on Tuesday to $1.10-1.22 per lb Cr, from $1.07-$1.15 per lb Cr.
A combination of tight supply and strong demand for ferro-chrome from China has led producers to increase the offer prices on the limited volumes of material available to the European market.
Some producers were uncertain whether to increase prices in Europe and reduce sales volumes there while increasing material flows to other markets.
“We are in a predicament. Do we sell [on a] cif [basis] to Asia now, or do we wait for delivered Western markets to keep sizzling, as they are?” a producer said. “There is not enough material around to meet the ‘V-shaped’ recovery in global demand. Even if there is material, the logistics capacity, as well as operational congestion, does not allow supply to meet the demand requirements.”
At least one producer has decided to move out of the European spot market in the short term to focus on rebuilding its stocks in the rising market, while continuing to meet its commitments under long-term agreements.
“Obviously, the shortage of material will further increase prices in Europe, China, India and the US markets, and we want to be ready with new stocks to meet these markets,” a second producer said.
The pricing outlook was expected to remain strong in Europe because stocks have been run down and only reduced volumes of new material were available.
“We expect the Chinese market to need to continue to buy, and therefore the European market will be stronger in March. If European consumers want material, they ought to buy now - or they will need to pay more,” the second producer said. “Because China is buying [the way it is doing], it has elevated all the other markets. China is the driving force; there is no need to sell small volumes in Europe.”
Although prices have strengthened, this has primarily been the result of tight supply in Europe rather than a recovery in demand for material.
“While the market is strengthening, it is due to supply-side factors. We do not have an increase in demand. We see the buying coming from speculation,” a trader said.
The relatively low demand in Europe, in comparison to China, meant that the continent was not attracting new imports of chrome.
“Prices will have to pick up in further in Europe but, at the moment, we are not receiving many inquiries. Those who have inventories of material that they bought at $0.88 per lb are in a good position [to make a profit],” a second trader said.
Demand for new material has been damped by consumers already sitting on large stocks, according to one consumer.
Lower grade ferro-chrome prices rise
Fastmarkets’ price assessment for ferro-chrome, high carbon, 6-8.5% C, basis 60-64.9% Cr, max 3% Si, cif Europe, widened upward by $0.03 per lb (1.5%) to $0.97-1.10 per lb Cr on February 9, from $0.97-1.07 per lb Cr on February 2.
The largest provider of this grade of material is India, where the domestic market is tight. Demand is also strong from China, where better net-backs can be made than from selling to Europe.
As a result, sales of new India-origin material to Europe have dried up, according to market participants.
“The surge in prices and demand from China have taken Indian buyers by surprise, so they do not have the inventories,” a producer of Indian ferro-chrome said.
“China is setting the market and $1.12 per lb Cr is the lowest that Indian producers will offer in Europe – they can’t go lower, but consumers are not ready to pay that,” he added. “As a result, I don’t expect any volumes from India to be heading to Europe at the moment.”
There were still inventories of material in Europe, but these will be consumed and, without replacement, the market in the region can be expected to tighten further, according to market sources.
“Indian offers are now above the market,” the second trader said, “so the lack of material from there will be felt most strongly by the end of March and into April.”