Recent ferro-chrome price surge in China supports ore market

The chrome ore market for sales into China rose with fresh liquidity being reported in the week ended Tuesday August 3, following strong recent gains in the downstream alloy market.

Fastmarkets’ chrome ore South Africa UG2 concentrates index, basis 42%, cif China, settled at $182 per tonne on August 3, up by 4.6% from $174 per tonne one week earlier.

“With the profit available from ferro-chrome production, it would be easier for producers to accept higher ore prices,” a ferro-chrome producer said. “Meanwhile, chrome ore producers in South Africa are holding their prices firm [because of the] increasing costs of freight and high production costs.”

Confidence in the alloy market was transferred into demand for ore, according to some market participants.

“The alloy market looks set to remain strong for some time to come, so producers don’t want to be low on ore coming through the pipeline,” an ore producer said. “And exports of ore from South Africa have been low recently.”

Similarly, the market for Turkish lumpy chrome ore also gained slightly, with higher offer prices because of increased shipping problems from container shortages and higher bulk carrier costs.

Fastmarkets’ price assessment for chrome ore, Turkish, lumpy, 40-42%, cfr main Chinese ports, was $260-270 per tonne on August 3, up by $5 per tonne (1.9%) from $255-265 per tonne one week before.

Imported charge chrome ticks up
Fastmarkets’ price assessment for ferro-chrome, 50% Cr, import, cif main Chinese ports, was $1.35 per lb contained Cr on August 3, up by $0.01 (0.7%) from $1.34 per lb contained Cr one week earlier.

“The imported high ferro-chrome price has been supported by strict energy restrictions in Inner Mongolia,” a second ferro-chrome producer said.

Demand for imported ferro-chrome in China will be driven by the availability of domestic supply, which has tightened following electricity restrictions in the north of the country.

The imported charge chrome market has equalled its highest level since December 26, 2016, with support from the China’s high domestic ferro-chrome tender prices.

“Should restrictions in the north be relaxed, the price would be difficult to hold at its current level. We have heard there may be a gradual recovery in Inner Mongolia in August,” the second ferro-chrome producer said.

But power shortages and staggered operations have also been reported in parts of southern China, such as Guangxi province, which is a production hub for ferro-chrome, according to a third producer.

The ferro-chrome market remained firm and with strong fundamentals, according to some market participants.

“Spot supply of ferro-chrome is tight, adding support to the current market. Meanwhile, China’s stainless steel market remains strong,” a ferro-chrome producer outside China said.

China’s domestic spot ferro-chrome price assessment fell slightly last week, however, on slim liquidity and weaker demand following the 10.8% surge in prices in the previous week.

Fastmarkets’ price assessment for ferro-chrome, spot, 6-8% C, basis 50% Cr, ddp China, was 10,800-11,300 yuan ($1,670-1,748) per tonne on August 3, a fall of 200 yuan per tonne (-1.8%) from 11,000-11,500 yuan per tonne the previous week.

“There was not much liquidity [during the past week]. Demand is getting weaker, especially from traders, with spot prices hitting a high,” a ferro-chrome trader said.

Some market participants took the opportunity to sell alloy, following strong price rises in the previous week.

“With current spot prices, there is enough profit margin for both producers and traders,” a second trader said. “And there are no signs of further upward movement in domestic spot ferro-chrome prices. Therefore, traders might see opportunities for profit-taking instead of restocking.”