Indian ferro chrome offers surge post-OMC's auction. Know why ?

Indian ferro chrome offers have witnessed a steep rise this week. Price assessment of ferro chrome (HC 60%, Si:4%) increased abruptly by INR 11,000/t w-o-w compared to the last assessments on 13 September due to high cost of production as OMC's chrome ore auction held on 18 September brought in a greater premium of up to 77%.

According to SteelMint's assessment on 20 September, Indian ferro chrome (HC60%, Si:4%) prices stood at INR 127,000/t exw-Jajpur. However, not many producers were offering at the moment, while a few were seen indicating INR 130,000-132,000/t exw Jajpur levels. In addition, no deals were heard so far this week as market participants wanted to see how long the elevated prices would last.

Factors driving the price escalation

• Higher bids in OMC's chrome ore auction: An extraordinary response was shown in the recently concluded auction on 18 September by Odisha Mining Corporation (OMC), a significant supplier of chrome ore for domestic companies. The 96,800 t of material that was put up for auction was completely sold out, with the high-grade material (52-54%) commanding a premium of 67-77% over the base price. This price increase contributed to the increase in ferro chrome manufacturing costs and the price increase.

  
  
  

• OMC's decreased allocation of high-grade chrome ore: The quantity allotted for the auction of chrome ore this month for grades 54% and 52-54%, respectively, decreased by 3,000 t and 2,400 t m-o-m due to less production amid rainy season. Furthermore, dispatches of chrome from other miners were on hold and OMC being the only source created a shortage of chrome ore in the market. On the other hand, the number of ferro chrome-producing companies increased and in order to keep production running, so there was intense bidding at the auction, and prices went way above the base price.

  
  
  

Why buyers hesitate to accept higher FeCr offers?

From the perspective of the buyers, there appeared to be resistance to the newly offered pricing. In order to determine whether prices would continue to rise or if they are only temporary, many market participants chose to wait and watch. Their concern was influenced by the following factors-

• Stainless steel demand at a moderate level: In the domestic market, there was still a moderate demand for stainless steel. As per SteelMint's assessment on 20 September, prices for 304 and 316 grades remained stable at INR 208,000/t and INR 357,000/t w-o-w. Since there was no sudden increase in demand for stainless steel, ferro chrome purchases were not done at currently prevailing market offers.
  
  
• Stability in Chinese ferro chrome prices: Ferro chrome (Cr:50%) prices in China remained stable at RMB 9,050-9,250/t (1,240-1,267/t). The shipping efficiency of Maputo, a major port in Mozambique is almost saturated so the shipments of chrome ore into China may be reduced. Producers were unwilling to reduce prices which largely kept prices stable. Therefore, the stability in China's pricing, which was significantly lower than India's current offers, further deterred buyers from locking in materials at the currently elevated prices.
  
  

Outlook

The majority of market players were waiting to see if the recently raised prices will last for a longer period of time. So, the exact price scenario will be clearer in the upcoming days. Prices are anticipated to stay on the higher side given the current trend.