China: Oversupply to continue weighing on ferro chrome market in 2025

• Slowing output growth unlikely to curb supply glut
  
  
• Falling chrome ore prices to weigh on FeCr market
  
  

Mysteel Global: China's ferro chrome (FeCr) market faced persistent downward pressure throughout 2024, a consequence of the significant oversupply caused by surging production and tepid demand from stainless steel manufacturers. This oversupply trend is likely to extend into 2025, Mysteel warned in its annual ferro chrome market report published on 9 January, even as production growth is expected to moderate.

In 2024, China's total ferro chrome production reached an estimated 9.5 million tonnes (mnt), comprising 8.82 mnt of high-carbon material and 673,900 tonnes (t) of the low/minor-carbon variant, equating to 4.81 mnt of chrome metal contained.

Additionally, China's ferro chrome imports rose notably in 2024, with imports of the high-carbon variant from Kazakhstan serving as the primary driver, where imports soared by 15% y-o-y to 1.91 mnt (metal contained).

Data from the General Administration of Customs confirmed this trend, with total ferro chrome imports of 3.4 mnt recorded during the first eleven months of 2024, compared with 3 mnt during the same period in 2023.

On the demand side, China's crude stainless steel production increased to 38.24 mnt last year, reflecting a 7.3% rise compared to 2023. This level of production corresponds to a ferro chrome consumption total of 6.11 mnt (chrome metal content), which was significantly below the total supply of 6.73 mnt (in chrome metal).

Mysteel analysts noted that this consumption figure accounts only for stainless steel production that relies on ferro chrome as a chrome source and excludes stainless steel made using scrap feedstock.

The supply glut became particularly pronounced in the second half of 2024, following the announcement in April by Tsingshan Group, the world's largest stainless steel producer, that it was raising its bids for high-carbon ferro chrome (50% Cr content) by RMB 500/t ($68.2/t) to RMB 8,995/t.

In addition to the rise, Tsingshan subsequently rolled its bid price over for four consecutive months, fuelling a production boom among domestic ferro chrome smelters. Mysteel's survey showed that ferro chrome production peaked in June, hitting levels not seen since January 2021.

However, the rapid production ramp-up, coupled with a sharp increase in nickel pig iron (NPI) prices in August, disrupted ferro chrome market fundamentals. NPI, another key raw material used in stainless steel production, saw a price jump that further squeezed stainless steelmakers' budgets for buying ferro chrome. A Wuxi-based chrome analyst noted that this dynamic made it increasingly difficult for Tsingshan to maintain its elevated bids for ferro chrome.

Looking ahead to 2025, domestic ferro chrome manufacturers are expected to slow the pace of introducing new production facilities and rushing expansions. Though high-carbon ferro chrome output is projected to reach 9.22 mnt, the increase of 13% y-o-y would be smaller than the 20% growth seen in 2024. Total chrome metal supply, including domestic production and imports, is forecast to rise to 6.95 mnt.

Meanwhile, demand from stainless steel producers is expected to edge up modestly, with chrome consumption estimated at 6.48 mnt. While this suggests a narrowing supply-demand gap, the market is still expected to face oversupply pressures.

Adding to the challenges, high-carbon ferro chrome prices are likely to encounter constraints due to weakening cost support from seaborne chrome ore.

As of 9 January, South African chrome ore with 40% Cr content delivered to China's Tianjin Port was priced at $190/dmt CIF, down $15/t from the previous month, according to Mysteel's assessment. This continuous decline in chrome ore prices has weighed heavily on the ferro chrome market sentiment.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.