China: Chrome Ore Prices Hitting Low

Since Oct till now, the chrome ore spot has been at low tide in terms of the transaction and neither transactional volume nor price is agreeable. Following the decline in the retail price of ferrochrome, the chrome ore spot price goes down in steps and there is no sign of a complete stabilization. Over the past months, China's chrome ore market has seen weak demand from alloy plants which hold an attitude that purchase seemed not something much necessary at the moment.

Reason for insufficient spot cargo purchase
The continuous decline in ferrochrome has prompted a decrease in chrome ore. Since Oct till now, the decline in spot cargo of RSA concentrate 40-42% has reached RMB 3/dmtu, a drop reflecting a downward market where traditionally also see the weakest demand from plants due to the unclear prospects of the later market. Secondly, alloy plants had put more effort to realize self-reliance on imports and are more dependent on direct oversea supply, which can be seen in the larger proportion of imported cargo used than the spot in most plants. During the recent months, the cargo booked previously in anticipation of the buoyant market is reaching ports back on back in large volumes. Plants thus have to consume self-owned stock instead of acquiring a low-cost spot. Besides, a high level of stock also resulted in the plant's capital flow. Moreover, plants hold negative outlook on later development of alloys and don't expect any positive move from the stainless steel side, leaving chrome ore vulnerable -alloy plant either bids low offers or chooses to walk away from it. Additionally, the capital constraint has been the bottleneck of chrome ore business as the lunar New Year draws close when plants are aware that a few traders do have such needs to cash in goods and this is the not-to-miss chance to take advantage of. The tactic to postpone purchase also piles on pressure on traders and will eventually benefit plants more.

On 6th November, the oversea offer of Oman cargo dialed down USD 5/MT CIF main port China and other origins temporarily remained unchanged. On 7th the lumpy ore offer from Turkey, Pakistan downturned their lumpy price of USD 5/dmtu, touching the lowest level over the last three years. But transactions on lumpy ores remain weak, due to the cost optimization constantly going on in alloy plants which reduced the dependence on lumpy ores.
Overall, the chrome industry runs weak and the purchase from alloy plant is notably more sluggish, leaving some traders even unaware who should they make an offer to. This is particularly true on high-grade lumpy ores, which saw transactions more difficult, both on spot and futures markets.

Till November 1, the total inventory of chrome ore at Chinese main ports reads 3.306MnT, which was 3.299MnT and 3.2MnT respectively on Oct 25 and Oct 28.