Indian ferrochrome price witnesses a halt after a month of continuous uptrend

Indian ferrochrome prices remained stable w-o-w as the demand in domestic market dried up, in an expectation that the prices might correct soon. However, producers are firm at their prices as they remain either booked for the month or low at chrome ore inventory, which is now much higher, pushing the production cost by up to INR 90,000/t.

Current market quotations are at around INR 102,000-103,000/t Ex-Jajpur. However, only a few small lots were sold at these levels, while major buyers refrained from buying. Meanwhile, demand for exports is scattered. Deals for Japan remain tight as they have procured enough quantity earlier and are now refraining to buy at higher prices. Chinese demand is also expected to slow down in the coming weeks.

Though the prices are on the higher side and domestic producers have a stronger hand in negotiations due to the supply crunch in the market, the market has turned slightly bearish.

Stated below are a few factors for the upsurge in prices to halt:

• Chinese buyers more inclined towards domestic procurement
  
  

Chinese steel mills are refraining from importing higher-priced material as they remain unsure of the future trend of the market. They are more inclined towards buying smaller lots at immediate deliveries from the spot market rather than take a chance of importing from other countries. Meanwhile, the tendency of buying has curbed after the major purchases were completed for the steel mills and the traders took a position in the market. Current deals are at RMB 8,600/t in China as compared to the higher quotation prices of around RMB 8,600-8,800/t in the spot market.

• Stainless steel prices downstream in China
  
  

Last week, Nickel prices in LME fell sharply by around 8% d-o-d, which dented the stainless steel prices in China. This downward trend of stainless steel prices in China has made the buyers more cautious of procuring higher priced ferrochrome from the market. Most of the buyers are of the view that they might witness a slight correction in the ferrochrome prices in the upcoming weeks and are thus holding a wait-and-watch mode.

• UG2 prices stable despite strong bullish sentiments
  
  

South African Chrome ore prices remained stable w-o-w despite bullish sentiments in the market. South African mines are still affected by the floods and the shipments are yet affected and delayed. Meanwhile, South African Rand weakened against US Dollars amidst economic slowdown and the freight cost increased further. All this indicated that the prices should increase further however, the higher inventory in Chinese ports and lower buying interest from China, turned the wave. Due to stricter electricity policy, the production of ferrochrome reduced from Inner Mongolia by 10% m-o-m which further reduced the consumption of chrome ore.

• Increasing production in China
  
  

There has been a significant curtailment of production in Inner Mongolia - the major ferrochrome producing region of China. There has been shut down in various regions of Inner Mongolia and the Ulanqab region is also set to face production cuts in March. However, production has been increasing in other parts of China, which could be a detrimental sign for the Indian export centric market. In Feb '21, production increased by around 6% owing to better production from the southern provinces of China, which is expected to increase further in the current month.

• Chrome ore Auctions in India
  
  

All the market participants of Indian ferrochrome market await the upcoming OMC chrome ore auctions, which is scheduled on 15 Mar'21. Prices of chrome ore has been increased by 23% m-o-m for the auction. This might increase the cost of production further which will decrease the profit margins for Indian producers.

• Outlook
  
  

Indian ferrochrome prices are expected to remain range bound amidst soaring production cost and supply crunch in the market.