ORES & ALLOYS BLOG: Chrome rally proves every dog’s market has its day
The chrome ore and ferro-chrome price rally of the past four months has forced both steel-making raw materials to the front of many agendas, Metal Bulletin learned in Cape Town this week.
Having attended previous Mining Indabas at which chrome was referred to as a dog’s market, or news broke of unpaid debts among producers, Metal Bulletin reporters were surprised to find out that chrome was the unlikely darling of the 2017 event.
Investor awareness of the chrome market and recent price performance was particularly interesting.
The enthusiasm was clear from day one of the conference, as conversations between financial, media and technology professionals at an evening drinks reception on Monday quickly turned to chrome.
And rumours that a high-profile mining company is researching options to gain exposure to speciality, off-exchange metals prompted further discussion.
Ferro-chrome suppliers reported consistent strong demand. Some said they were cleaning out years of stock they had held during the downturn, or that rivals were approaching them for material, and one chrome market participant admitted he is fishing for ore offtakes from competitors.
There were even reports of plans to bring long-idled capacity back into production.
On Wednesday, Metal Bulletin caught up with Phoevos Pouroulis, ceo of chrome ore miner Tharisa, who confirmed there is increased demand from investors for the company’s stock. He believes the investors are most likely to gain exposure to chrome by buying into listed miners that pay dividends, giving Tharisa an advantage over most of its rivals.
“Investors are looking for listed, dividend-paying companies,” he said.
That night, at an investors’ party, mentions of chrome piqued certain guests’ interest.
The next day, Appian Capital founder and general partner Michael Scherb agreed that chrome looks promising this year, but he warned that rallies in niche markets can unwind quickly.
“This could be a decent year for chrome, cobalt and lithium. But it needs to be remembered that these niche commodities can move quickly and that works both ways,” he said.
High carbon ferro-chrome is trading at $1.31-1.46 per lb, compared with 77-85 cents a year ago.
South African UG2 chrome ore is trading at $390-400 per tonne, up from $77-80 last year.
One of the most promising indications that prices will hold up at recent levels is the narrowing of discounts against benchmark prices, a theme that has been developing for a few months.
“Recent, realistic discounts for spot ferro-chrome against the European benchmark are at about 12-15%. That’s half the size of discounts in 2016,” one chrome market source told Metal Bulletin on the sidelines of the conference.
Chrome market participants – and the growing numbers of mining and finance sector professionals hoping to join them – will continue to track stainless steel growth in China to gauge how resilient the price recovery is.