India: Ferrochrome prices down on limited demand from China

The Indian ferro chrome market is substantially dependent on China as the latter consumes more than 30% of the total India's ferro chrome production. Thus, with China limiting its imports, prices in the Indian market have witnessed a substantial drop.

Currently, ferro chrome prices in the domestic market are at around INR 121,700/tonne (t) ex-Jajpur. However, some deals were also recorded at a higher range. Meanwhile, export offers dropped to cents 127/lb, with some deals recorded at even lower prices.

Why the market turned gloomy?

• China slow in spot buying
  
  

Major Chinese stainless-steel mills increased their tender prices by RMB 510/t, boosting sentiments for the Indian sellers, which fuelled up prices last week. However, most of the Chinese importers are now quiet and only dependent on the spot market and the long-term contracts.

The Chinese stainless-steel mills are now getting back to normalcy which has led to a fall in its prices. Therefore, most of the mills refrained from importing as they are confident about a further fall in prices and easing of material availability.

• Increased Chinese ferro chrome production
  
  

Chinese ferro chrome production increased by about 16% m-o-m in Oct'21 and is expected to be further improving in the coming days. The country faces no dearth of material currently as the market is overflown with ferro chrome. Thus, there has been a regular correction of RMB 100-200/t every week. Prices are currently at around RMB 10,450/t ex-Inner Mongolia.

Although, the production cost has increased due to higher electricity costs, it is providing no support to the down trending Chinese ferro chrome prices.

• Few sellers getting aggressive to hold positions
  
  

Indian ferro chrome prices vary from seller to seller. As per market sources, most sellers booked with the long-term contracts could strike a deal at around 129 cents/lb, while the sellers in the spot market are struggling to get deals at 126cents/lb. Thus, the producers having long term contracts in the export market remain firm on their offers and are not willing to negotiate below INR 123,000/t levels, while some deals were concluded at much lower levels of INR 120,000/t.

• Increasing global production could be worrying
  
  

With prices increasing in Sept-Oct'21, many countries including South Africa pulled off their ferro chrome capacities to the highest levels. Major ferro chrome smelters from South Africa declared their interim results showing significant uptrend in the production of ferro chrome. Meanwhile, a major European ferro chrome producer also ramped up its production by upto 15% in the third quarter of the year. Thus, the increased production across the world may be detrimental for the export centric Indian ferro chrome industry.