Low-carbon ferro-chrome prices in Europe enjoy upswing as China soaks up units

Low-carbon ferro-chrome prices in Europe have gathered strength in recent weeks as availability has tightened due to increased demand in China, where production costs have been high, sources told Metal Bulletin.

The low-carbon market missed out on much of the chrome rally in late 2016 which helped high-carbon prices in Europe gain over 60% year-on-year and charge chrome import prices in China more than double.

In contrast to last year, the strength in high-carbon global ferro-chrome prices over the past week has also been seen in the low-carbon market in Europe, where prices have climbed around 3% over two weeks. 

Ferro-chrome with a maximum of 0.1% carbon and an average 60-70% chrome content was being traded at $2.18-2.25 per lb on a delivered Europe basis over the past two weeks, as assessed by Metal Bulletin on Friday March 10, up from $2.10-2.20 per lb two weeks earlier.

Alloy with a maximum of 0.06% carbon and 65% chrome was assessed at $2.21-2.27 per lb on Friday, up from $2.15-2.2 per lb a fortnight prior.

Market sources have attributed the rising low-carbon ferro-chrome price to more material finding its way to other regions, away from Europe – particularly to China, where alloy production costs are high due to last year’s chrome ore rally.

Turkish chrome ore rally
Low-carbon ferro-chrome in China is typically produced using Turkish and Albanian ore. Metal Bulletin’s Turkish chrome ore price was assessed at $375-405 per tonne cfr on Friday March 10, and while still high compared with early 2016, this was down from its December 2016 peak of $430-440 per tonne. 

Prices of chrome ore began to rally in October, climbing over 60% in just two months. Cheaper ore stocks from before the rally took some time to be depleted, meaning the effect of the more expensive chrome ore purchasing in the fourth quarter has been felt in Chinese domestic production since the Spring Festival earlier this year, according to a source with knowledge of the matter.

This caused Chinese domestic low-carbon ferro-chrome prices to increase dramatically in recent months. Sources told Metal Bulletin that prices in China are at 16,600-16,800 yuan ($2,400-2,429) per tonne and still climbing. Domestic sellers are, meanwhile, reluctant to sell as a result of bullish expectations for low-carbon ferro-chrome prices.

Another Chinese source said low-carbon ferro-chrome production in China has decreased a lot recently, which is lending additional support to prices.

“Domestic [Chinese] production is now becoming even more expensive, leading to further requirements for imports from the rest of the world at attractive pricing and payment terms,” one international seller said.

Chinese customs data shows low-carbon ferro-chrome imports have increased dramatically in 2017. In January, China imported 2,473.32 tonnes of ferro-chrome (max 4% carbon), more than the total volume of Chinese imports in 2016.

China imported 2,343.579 tonnes of low-carbon ferro-chrome between January and December in 2016.

In December, China imported 327.12 tonnes of low-carbon ferro-chrome.

“China is now consuming the expensive chrome ore units priced at $400 per tonne plus,” the seller outside China said.

With chrome ore prices down slightly recently, the effect on ferro-chrome prices could be limited, however. On the other hand, there are other production costs to bear in mind, including the coking coal price, which sources estimate accounts for around 10% of the cost of production. 

Metal Bulletin assessed hard coking coal Shanxi spot market domestic delivered prices at 1,410-1,590 yuan per tonne on March 10. 

Chrome ore typically accounts for around 50% of the cost, according to market sources.

For now, sellers of low-carbon ferro-chrome are broadly optimistic about both Asian and European markets.

India is typically a big buyer of Chinese low-carbon ferro-chrome. At today’s prices, and with demand strong in India too, producers say they have another export option outside Europe.

“Why would we sell into Europe and bear the costs… when we can sell into India and China for cash?” the seller source asked.

Outside China, low-carbon ferro-chrome is mostly produced in Russia and Kazakhstan using local ore.

Higher sales to Asia are understood to have reduced spot availability in Europe. Sources say the stocks in Europe are generally already allocated, meaning spot availability is low.

Steel demand in Europe has, meanwhile, increased, due to anti-dumping rules, leading to fewer supply options.

“We have seen our long-term customers asking for additional material outside their LTAs [long-term agreements],” a source in the low-carbon ferro-chrome market said.

Others confirmed that spot interest had picked up in Europe.

“They had been taking small tonnages, but now that they see that the prices have started to move further up, we can see that the buying has become more regular,” a second seller said.

US market deflated
The source noted, however, that the US low-carbon market has so far failed to show the same strength as Europe, as stocks appear to be more plentiful there.

Metal Bulletin’s 0.1% carbon (62% min chrome) fob Pittsburgh ferro-chrome price, as assessed by sister title AMM, was stable last week at $2-2.10 per lb. However, it had dropped the week before from $2.02-2.12 on February 23. 

The low-carbon ferro-chrome market has seen scarce spot activity in recent weeks, with prices feeling downward pressure over that time as a result.

“While contract demand has been pretty solid, activity in the spot market has been very sporadic over the last several weeks,” a US supplier source told AMM.

A second supplier in the USA agreed that the spot market had fallen dormant over that time. “This market has been one of the quietest across the alloys in terms of spot activity. Pricing has felt a little pressure as traders push to sell off material fearing the market has peaked,” he said.

Given the quiet nature of spot market demand and ample stocks, market participants did not expect to see much upside in the near term.