India: Ferro chrome offers increase on supply shortage

Indian ferro chrome offers increased due to supply shortage in the domestic market. However, only a few deals were concluded this week at lower prices, mainly by producers facing liquidity issues.

Currently, the prices are at around INR 82,000/tonne (t), with most producers not offering any material in the domestic market. No deals above INR 80,000/t were reported since last week in Jajpur. However, producers are regretting the lack of bulk orders in the domestic spot market, as they don't have much material to offer.

Sentiment in the ferro chrome market is up due to a confluence of factors listed below:

Supply shortage in domestic market:
Many Durgapur-based ferro chrome producers have shifted to silico manganese due to better profit margins. All the residual quantity they had before shifting to manganese alloys are now mostly sold out. In addition to this, there are only a handful of smaller ferro chrome producers in the market with limited quantities available with them and the larger producers are holding back their offers to only caterto their previous long-term contracts. Thus, there is not much stock for bulk orders in the domestic market.

Upcoming demand from stainless steel companies
As the number of Covid cases in India is showing a downtrend, ferro chrome smelters remain positive that the oxygen supply situation should ease by next month. The stainless steel mills were badly affected due to the non-availability of oxygen. Majority of the producers had to compromise on their production. However, there is an expectation that soon the lost volume would be made up and lead to increased demand for ferro chrome.

Higher electricity tariffs in South Africa
South Africa's power tariff is set to increase by 17.8%. Consequently, the production cost for chrome ore and the power-intensive ferro chrome would increase significantly. The heightened power tariffs will impact the entire economy, increasing the cost of basic amenities like water and food. Thus, it is expected that the country, which is the largest source of chrome ore and ferro chrome to China, would increase prices of both materials.

Chinese ferro chrome prices up
Chinese ferro chrome prices increased by RMB 100-200/t to RMB 7,400-7,500/t in Inner Mongolia. The price hike is on account of higher chrome ore futures, which are up $10/t and increasing coke prices.

Meanwhile, nickel prices are also climbing up steadily and are currently at $18,142/tonne (LME), pushing up stainless-steel prices and the overall market sentiment.

Outlook
Although there is ambiguity over the upcoming Chinese tenders, Indian smelters remain assured that the prices might increase in the domestic market as soon as the stainless-steel mills start operating at normal levels again.