India: Ferro chrome prices rise on an improved demand

Indian ferro chrome prices increased by INR 2,700/t w-o-w on good export demand. Meanwhile, production cuts in South Africa and Zimbabwe due to electricity supply shortage turned the overseas buyers' interest from these countries to the Indian market.

In addition, the positive response to Vedanta's ferro chrome auction on January 17, also influenced producers to raise their offers.

According to SteelMint's assessment on 19 January, Producers were offering at around INR 110,000-111,000/t exw Jajpur. However, some producers closed deals at around INR 108,000/t exw prior to Vedanta's auction result. SteelMint recorded deals of around 2,500t this week.

Key things to look out for

• South Africa faces major power crises: Eskom has announced that power cuts will be increased to Stage 6 at night on 11 January, resulting in between eight and twelve hours of no electricity per 24-hour period, reducing ferro chrome production by 30-40%. However, the export market was not as affected last week, but market participants are anticipating an impact on ferro chrome prices globally, as South Africa is a major exporter of ferro chrome worldwide, with a production of around 3.9 million tonnes in calendar year 2022 (CY22) (roughly 25% of total global production).
  
  
• Situation grim in Zimbabwe too: As lingering droughts hit Southern Africa's hydropower dams due to climate change, Zimbabwe is also facing growing electricity shortages. However, it has not impacted the industries yet. But, if an interruption in electricity supply affects Zimbabwean industry, the country will be blamed for a global shortage because it operates around twenty ferro chrome plants. After South Africa, Zimbabwe has the world's second largest chrome ore reserve. This could help ferro chrome prices in the short-term. So, this was also triggering the prices in Indian market on contemplation of an impact in production.
  
  
• China's chrome ore prices hiked: Chrome ore prices in China shoot up by around USD 15/dmtu w-o-w due to good demand amid low inventory in Chinese ports. According to the assessment on 17 January, South African chrome ore concentrate (40-42%) were being offered at around USD 270/dmtu while Turkish chrome ore concentrate's (46-48%) offer was at around USD 350/dmtu. This also supported the ferro chrome offers this week amid high production cost.
  
  

Outlook
Demand from China is currently subdued due to the New Year Holidays, but adequate inquiries are expected following the holidays due to an ease in Covid cases and possibly curtailed supply from South Africa. It is expected that prices will again start surging, sources informed.