India: Ferro chrome prices drop as domestic demand wanes

The Indian ferro chrome market has fallen since last week and Vedanta's ferro chrome auction was concluded at lower levels due to low domestic demand.

According to SteelMint's assessment on 26 May'22, ferro chrome smelters were offering material at around INR 118,000-120,000/t exw-Odisha in the domestic market. A bearish stainless steel market is pushing sellers to close sales aggressively but deals are currently not taking place.

On account of weak domestic demand, stainless steel prices of 304 grade CRC fell by around INR 15,000/t w-o-w to INR 265,000/t exw-Mumbai. Additionally, the increase in export duty of 15% in steel has adversely affected prices.

Furthermore, stainless steel production cuts due to demand-supply mismatch has reduced the demand for ferro chrome. This has resulted in lower prices.

Meanwhile, the surge in shipping rates and the Yuan's depreciation against the USD weighed on Chinese buying interest, which is already low due to COVID-induced lockdowns.

In addition, demand from China was also muted as most of the buyers were waiting for purchase tender prices of major steel producers for Jun'22. Today TISCO announced its ferro chrome purchase tender price, unchanged m-o-m, for June delivery due to high production costs and tight supplies of chrome ore.

Outlook:
Demand in both domestic and overseas markets is limited. Meanwhile, the export tariff on stainless steel could reduce production in the short term and thereby demand for ferro alloys from the stainless steel mills may edge lower.

Currently the Indian ferro chrome market is more reliant on domestic demand. China is coming out of COVID and so spot trades are likely to resume. But the Chinese stainless steel market will rely more on domestic sourcing due to existing inventory in the system. However, considering the high costs of production in China, it is expected that some demand will emerge towards the end of June.