India: Ferro chrome prices rise further on favourable demand-supply dynamics

Indian ferro chrome prices have been increasing significantly since last week owing to supply concerns. Prices escalated to INR 129,000/tonne (t), up by INR 25,000/t m-o-m, mainly after Chinese prices started increasing.

Though, prices in the Chinese market remained stable this week, sentiments in the Indian market remained strong, fuelling sellers' expectations that prices may increase further. Most of the Indian smelters are now offering ferro chrome at INR 130,000/tonne in the domestic market. Increased prices are also backed by the recent ferro chrome auctions held by Vedanta.

Factors supporting increased prices
Stringent supplies in the domestic market
There are a handful of ferro chrome suppliers, while many smaller smelters have either shifted to manganese alloys or have limited inventory to offer in the spot market. This has put stainless-steel mills in a difficult situation as they are obliged to book ferro chrome at higher prices. Recently, ferro chrome auctions by Vedanta fetched bids at INR 129,200/t ex-Jajpur. Post the auctions, domestic sellers have increased their offers to INR 130,000/t exw. However, only limited quantity has been dealt at INR 130,000/t till now.

Most steel mills are now booking in smaller lots owing to higher prices of raw materials. Meanwhile, nickel prices saw a slight correction against the previous week and are at $19,448/t, which is still on the higher side.

OMC chrome ore auction gets positive response
Domestic chrome ore prices increase after the conclusion of the OMC auctions. In the auction, the higher-grade ore fetched aggressive bidding and was booked at 10% higher than the base prices, while most quantity was booked at the base price. Rise in bids can be attributed to higher ferro chrome prices in the domestic market.

Chinese demand may increase in coming weeks
Chinese demand for ferro chrome has been tepid since last week as buyers stopped buying from the international market. . Due to disturbed production in China owing to increased Covid cases and higher raw material prices, demand from stainless steel mills reduced. Prices for China corrected slightly this week by 3 cents/lb to 127 cents/lb CIF China.

However, it is expected that demand may increase soon as the epidemic has been controlled in the country. In Jul'21, ferro chrome production fell by 85,900 t to 0.4 mn t amidst higher electricity curtailments. Though the electricity norms have been eased in Aug'21 amidst higher ferro chrome prices and acute shortage in the market, it is expected that the country will face material shortage and demand will pick up in the coming weeks.
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Chinese ferro chrome prices have increased to around RMB 10,800-11,000/t ($1,672-1,703/t), which provided chrome ore miners with a leverage to increase its prices. Meanwhile, as the profit margins are higher, the Chinese smelters are willing to accept higher offers for ores. Current prices are at $185/t CNF China for 40-42% grade of South African origin. In addition, higher freight costs are also adding up to rising prices of ore, further fueling hopes of an increase in ferro chrome prices.

Outlook
Indian ferro chrome smelters and major traders are firm about the positive sentiments in the market. It is widely accepted that prices will further increase and demand from the Chinese market will be strong in the coming weeks.