December Purchase Price of Ferro Chrome Significantly Reduced In China
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Tsingshan group in China announced its December tender price for HC Ferro Chrome which is down RMB 400 (USD 57) from November levels. The prices of Ferro Chrome were dropped by 350 Yuan (USD 50) / 50 basis tons in November, and the drop is still significant owing to the bearing market sentiments. The demand of Ferro Chrome remains absent all over the globe. As the steel industry enters the traditional off-season, the demand for ferrochrome continues to be weak, and the obnoxious situation of "many monks and little porridge" has been reversed, as the oversupply governs the market. There are practically no transactions happening in the spot market and the purchase prices have only been reduced to motivate transactions. Even though there are practically no transactions, but the production and import data for Ferro Chrome both remain on the higher side. Combining these two factors with the high inventory in hand with the buyers, the Ferro Chrome market is still expected to be bearish. Meanwhile, major Steel mills have delayed their Purchase tenders and therefore, the market is more in a wait and watch mode. The buyers are waiting for the remaining two major buyers, viz., Bao Steel and Tisco to release their prices.
Tsingshan Group's released its HC Ferro Chrome purchase price for December'19 which is 5997 Yuan (USD 852) / 50 basis, and the price of Tianjin Port was reduced by 160 Yuan (USD 23). January 10, 2010 (Due to the large increase in shipping prices at the end of the year, the Tianjin Port price reduction was temporarily adjusted from 140 - 160 Yuan). Last week, CITIC Pacific Steel also reduced its prices by 450yuan/50basis tons to 6300-6400 Yuan (USD 895-909) / 50 basis. Yesterday, the Hegang group announced its prices and were down by 650yuan/50basis tons to 6300-6400 yuan / 50 basis.
Meanwhile, due to the heavy snow in few parts of Inner Mongolia, the logistics of raw materials entering the plant are affected. At the same time, some coke companies have raised their prices by 50 Yuan/MT, which will certainly increase the pressure on the producers as the fixed cost of production increases. The industry lacks confidence in the market outlook, so it is still mainly to push down prices in procurement strategies.
Chrome Ore Market:
The Chrome ore market was already deep in the marsh, even before the release of the tender price. Meanwhile, the confirmation of new tender price will only divert hopeless alloy plants which could not alter anything on stainless steel makers to impose more pressure on chrome ore price when it comes to purchasing. Most chrome ore traders use letters of credit as leverage in the business. Due repayment is the most vulnerable time for them after a long time without smooth sales and it will be more difficult to handle particularly near year-end when most of them need cash flow. Thus, a few ore traders have to compromise the market leading to instability of ore price. At present, no matter the spot or overseas purchase, plants in south China are in losing state and accompanying the complaints from plants, there will be an increasing number of shutdown and production cuts leading to less consumption on chrome ore.
On the future outlook, the market still continues to be bearish amid low demand. There is very little hope that any transactions would boost even after the significant reduction in the purchase prices. However, still the announcement from the two major miners are awaited, the market remains in the wait and watch mode till then.
