UG2/MG chrome ore prices experience sharpest decline since Sept 2021

UG2/MG chrome ore prices experienced major declines in the week to Tuesday July 12, dropping by $15 per tonne week on week, as the market saw the beginnings of a break in the continuing stalemate of recent weeks

Fastmarkets’ chrome ore, South Africa UG2 concentrates index, basis 42%, cif China stood at $270 per tonne on Tuesday, down by 5.26% from $285 per tonne on July 5. This marks its largest weekly decline since September 7, 2021, when it fell by 6.25%.

Overall, sellers continued to resist lower prices, while buyers pushed back against high costs, showing the persistent dichotomy between the two. And in the latest week, reported figures showed a wider spread than in recent weeks – but with a clear shift toward the lower prices.

“LG6 material has also dropped… this week – which indicates the weakness of the markets. However, I think that most of the suppliers are still holding out as they are trying not to cause a sharp fall in prices, while the stock levels in China remain low,” a chrome ore seller in South Africa said.

While sellers have been holding prices at higher levels following the continuing logistical challenges in South Africa, along with low port-side inventory in China, buyers have been lamenting the impact on profit margin of ore costs.

And in the latest week, according to some market sources, although liquidity overall remained low, some lower-priced deals have now gone through. However, it is not year clear whether this marks a true end to the standoff between buyers and sellers.

“The direction is unclear now, with most market participants standing on the side lines. Liquidity is slow, with deals at small volumes. As far as I know, overseas sellers are holding their prices. But it is an undeniable fact the [UG2/MG chrome] ore market is under pressure due to shrinking demand in the stainless steel sector,” a trader in China said.

“The market might remain in a stalemate [until] there is any obvious sign of demand recovery,” the trader added.

“The market seems to be in disarray at the moment. Downstream, smelters and ferro-chrome markets are looking fairly weak, [but] from the export side out of South Africa, it’s extremely difficult,” a trader in South Africa agreed.

“It’s got to a point where even shipping out of Maputo [in Mozambique] is tricky. A lot of suppliers are pushing [material] to Maputo, and it’s causing bottlenecks there. I still don’t see export numbers out of South Africa increasing, which will put further pressure on port stock,” the South African trader added.

The portside spot market in China did not appear any stronger than the corresponding seaborne market, with buyers only taking material on a hand-to-mouth basis, according to sources.

Meanwhile, under pressure from the high chrome ore costs, market participants have said they expect increased chances of output cuts, with smelters in the south of China embarking on summer maintenance, while some in the north may be looking to reduce production because of the impact on profit margin.

On the sell side, however, sources said they continue to believe supply/demand dynamics will limit the downside.

“Suppliers simply can’t offer cargoes because they’re unable to move them out of South Africa,” a trader in Europe said.

“Even with slightly reduced alloy production rates in China, their consumption [of chrome ore] is still 1.3 million to 1.4 million tonnes per month. They’re only getting 1 million tonnes or slightly less [from South Africa] and the total availability from the rest of the world is about 200,000 tonnes.”

His view, he added, is that if ferro-chrome smelters in China choose not to purchase chrome ore now, they run the risk of being unable to do so later and therefore unable to keep up with any improvement in the stainless steel market brought about by economic stimulus.

Turkish lumpy chrome ore prices also edged down further this past week.

Fastmarkets’ latest assessment of the price of chrome ore Turkish lumpy 40-42%, cfr main Chinese ports stood at $340-350 per tonne on Tuesday, down by $10 per tonne from $350-360 per tonne a week earlier.

Some market participants have said they believe there could be a further drop if bearishness in the downstream ferro-chrome market remains, while others described a holding pattern between buyers and sellers.

“[At the moment] no one buys, no one sells. Suppliers just waiting for inquiries to start negotiations,” a second ferro-chrome seller said.

Ferro-chrome price range widening downward

The domestic spot ferro-chrome market continued to trend downward in the week to Tuesday, amid slow liquidity and bearish market sentiment.

Fastmarkets’ price assessment for ferro-chrome, spot, 6-8% C, basis 50% Cr, ddp China was 8,700-9,100 ($1,293-1,352) per tonne on Tuesday, widening downward by 200 yuan per tonne from 8,700-9,100 per tonne a week earlier.

“Liquidity for the spot market was extremely slow during the past week, with only the delivery of long-term contracts. While there are offer prices close to Tsingshan’s July tender price at 8,995 yuan per tonne, downstream buyers are cautious in procurement,” an alloy producer source said.

“Meanwhile, smelters are reluctant to drop spot prices further given the high ore costs, leading to the market stalemate,” he added.

The drop in charge chrome import prices slowed down in thin trading in the week to Tuesday, after a more pronounced decline in the previous assessment.

Fastmarkets’ price assessment for ferro-chrome, 50% Cr, import, cif main Chinese ports was $1.07 per lb on Tuesday, down by $0.01 per lb from $1.08 per lb the previous week. On July 5, it had dropped to $1.08 per lb from $1.14 per lb.

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