China: Ferro Chrome Prices Restricted Due to Falling Stainless Steel Prices

The purchase tender prices for HC Ferro Chrome by small to medium scale stainless steel mills for April have increased, but with a slightly lesser amount than in the retail market. When combined with the flat tender prices by some iconic stainless-steel mills, the HC Ferro Chrome market hit it a lull in its upward track. At present, most HC Ferro Chrome producers have maintained price levels that were effective before the holidays (April 04-06).

Although suppliers are active in making offers, yet ex-factory price offers can't be anything below RMB 5,700/50 basis per tonne, owing to the increase in costs. However, the decline in stainless steel price is yet to halt, resulting in limited acceptability by purchasers for high offers and HC Ferro Chrome market is stuck in a stagnant state.

Most participants are looking at the future operations of mines and smelters after the end of 21 days of national lockdown implemented across South Africa. And before the situation gets clearer, purchase activity is mostly based on demand out of necessity.

Few market participants believe that based on the current domestic output of HC Ferro Chrome which is less than 400,000 MT and imports having halved to 200,000 MT, some stainless steel industries would face a shortage in supply in May if supply chain from South Africa and India can not be restored.

Shipments through Mozambique ports such as Maputo has been normal for cargo already at ports. Yesterday, some South African mines granted with immunity rights, have started working on shipments for cargo already at ports, while inland transport to port is still disrupted and at low efficiency.

However, there are other opinions that South Africa is unlikely to extend its lockdown period given its fragile economic conditions with a higher rate of unemployment as well as the disparity in social developments, which are uncertain factors for social disorders, posing threat to a stable and sustainable development if lockdown extended. Exacerbated with the record low South African Rand against USD, miners might get more eager to ship their cargo at lower rates to get the operational return.

In this case, the stock of almost 4 MnT of at China's major ports is undoubtedly a driver to further drag down the Chrome ore prices. The current down-trending market for stainless steel, suffered from sluggish recovery in domestic demand and disrupted overseas orders, does not form a supportive ground for an increase in the Chrome ore and Ferro Chrome prices either.