Firm costs to stabilise China's ferro chrome prices in August

Mysteel Global: The recent slide in China's market for high-carbon ferro chrome (FeCr) is expected to end this month, primarily due to the steady price of imported chrome concentrate, a crucial raw material for ferro chrome smelting, according to a Wuxi-based analyst. However, an oversupply of ferro chrome in China's domestic market continued to pose a risk to market fundamentals.

As of 9 August, the price of high-carbon ferro chrome with 55% Cr content in North China's Inner Mongolia, a key benchmark for the domestic market, had dropped to yuan 8,700/tonne ($1,211/t) (50% Cr), ex-works and including tax- a decline of yuan 200/tonne from the previous month.

The recent decrease in ferro chrome prices reflected the prevailing pessimism in both the ferroalloy and downstream stainless steel markets over the past month. This sentiment was exacerbated by Tsingshan Group, a major Chinese stainless steel producer based in Zhejiang, East China, which announced that it would not purchase ferro chrome in the market in July beyond its long-term contract obligations.

In addition, Tsingshan reduced its August bid price for high-carbon ferro chrome by yuan 100/t, settling at yuan 8,895/t (50% Cr) including delivery and tax, with delivery required before 10 September. Meanwhile, Tsingshan clipped its purchasing price for August at Tianjin port by yuan 150/t m-o-m, according to the company's bidding announcement on 24 July.

Tsingshan's lower bid prices were largely influenced by the rising cost of nickel pig iron (NPI), another key raw material for stainless steel production, which has squeezed the profits of stainless steel mills and rendering the makers more cautious about purchasing other expensive ferroalloys, the analyst noted.

According to Mysteel's latest survey, as of 9 August, the price of 8-10% grade NPI in Jiangsu had risen to yuan 1,015/mtu, including delivery and 13% VAT, marking a significant increase of yuan 40/mtu from 9 July. Despite the bearish market in July, the analyst remained optimistic about ferro chrome prices in August, thanks to the firm price of chrome ore and the anticipated increase in stainless steel production.

Over the past month, the price of chrome concentrate imported from South Africa has decreased slightly by yuan 1/dmtu on month, settling at yuan 62.5/dmtu Tianjin port as of 9 August, according to Mysteel's latest assessment. This small drop was mainly due to the high stocks of chrome ore accumulated at the beginning of July, which exerted downward pressure on concentrate prices.

As traders reduced their quotations to offload low-priced ore products, the stock of chrome ore at ports shrank to an eight-month low of 2.31 mnt as of 2 August, representing a decrease of 393,000 t from 5 July.

Given the reduced stock levels, the downward trend in chrome concentrate prices is likely to be curtailed, providing more support for Chinese ferro chrome prices in August. In addition, Mysteel's survey of domestic stainless steelmakers' production plans indicated that crude steel output in August is expected to reach 3.39 mnt, representing a 2.37% m-o-m increase. This rise in stainless steel production will likely boost ferro chrome consumption, further supporting its prices, Mysteel Global noted.

Mysteel's survey, covering 95% of all domestic ferro chrome smelters, showed that China's production of high-carbon ferro chrome remained robust in July, despite a 2.1% m-o-m decrease to 801,800 t.

"Domestic ferro chrome smelters are still keen on ramping up production, particularly in southern China, where mills benefit from lower costs due to cheaper hydropower during the wet season," the analyst commented. However, he cautioned that ample supplies of the ferroalloy could exert some downward pressure on ferro chrome prices this month.

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