Indian ferrochrome producers are confident that the Chinese ferrochrome tenders will be much higher, owing to the increased spot prices in China. Thus, most of the producers have restrained from offering in the spot market this week and are waiting for the new round of tender prices by Chinese steel mills.
Currently, prices in the domestic market are fluctuating with most deals happening at around INR 99,000/t Ex-plant. Meanwhile, few deals were also concluded at INR 1,00,000/t to merchant exporters. Producers are offering ferrochrome at cents 109-110/lb CNF China. However, the last few deals were concluded at around cents 105/lb CNF China.
Meanwhile, Indian ferrochrome pricing dynamics have changed since past mid-year and is dependent on many factors now. Overall, the sentiment remains extremely bullish due to the following reasons:
- The increased production cost of ferrochrome in Inner Mongolia, China
The Chinese government has passed stricter environment laws in Inner Mongolia. It is firmly believed that the dual control on energy consumption will put a check on the production of ferrochrome and will also have a significant impact on the production cost. Since Inner Mongolia is the largest producer of ferrochrome in china, the overall prices are set to increase due to the increasing production cost. - Increased spot prices of ferrochrome in China
Currently, the spot market prices in Inner Mongolia are hovering at RMB 8,500-8,600/t. Meanwhile, the prices quoted are now higher by up to RMB 300/t. There was a significant increase of RMB 200/t in the prices of ferrochrome in the spot market owing to increased UG2 prices. There is a firm belief that the upcoming tenders might have an increase of up to RMB 500/t than the previous tenders which was settled at RMB 8,200/t for Baosteel. - Prices of South African UG2 increased by $10/t
Prices of South African chrome ore increased by $10/t w-o-w to $175/t CNF China, amidst higher inquiries. The increased prices are also due to higher freight cost and the bullish ferrochrome market. However, due to stringent energy policies in Inner Mongolia, the production is getting affected and the consumption of chrome ore is also lower. However, traders hold a positive outlook, due to the substantial increase in the prices of ferrochrome. Meanwhile, many ferrochrome producers have sufficient stock and it might be a hindrance in acceptance of higher prices. Chrome ore suppliers are in a wait-and-watch mode while keeping their prices firm. - European ferrochrome prices hit a two-year high
Owing to the continuous supply shortage of ferrochrome from the Indian and South African market, the prices of ferrochrome shot yesterday to cents 122/lb CNF Europe. The stainless-steel market recovered in Europe and started production since Christmas, which increased demand for Indian ferrochrome. However, the market is now short of supply and with increasing freight cost, container shortage and 4% export tariff, it is almost not feasible for exporting to Europe. However, this has increased the overall export sentiments for the Indian industry. - Only a handful of producers in India
Most of the supply in India is through a handful of producers, who are having a strong hand at negotiations for bulk deals. Meanwhile, smaller producers are low in the ferrochrome inventory and are unable to cater to the bulk orders. Thus, many smaller producers, who are facing a liquidity crunch, are also short selling material. However, the majority of the material comes from a few large-scale producers, which is helping the prices to remain firm. - Increased chrome ore prices in India
Indian chrome ore prices spiked sharply in February, leading to lower consumption of chrome ore from the domestic market. Meanwhile, the demand for chrome ore increased as many smelters increased their production of ferrochrome due to better price realization while having chrome ore stock only for the month. Thus, most of the producers are low in their chrome ore inventory and would be obliged to accept the higher prices from OMC (Odisha Mining Corporation). Meanwhile, the other major miner, Tata Steel and Mining Ltd (TSML) are also holding their offers for chrome ore for the month amidst better realization in ferrochrome production. Therefore, there is a severe shortage of ores with the producers. Currently, the price of 52-54% Cr2O3 is at INR 19,451/t ex-mines, OMC. - Export limitations also driving up ferrochrome prices
As India is a net exporter of ferrochrome, the container shortage issue clubbed with escalating freight cost is a challenge for Indian smelters to overcome. In the meantime, the Indian currency has also appreciated making a further dent in the exports. To add it up, exporters will be paying additional taxes, which was earlier reimbursed by MEIS till March, as most of them have already exhausted the limit of INR 2crores. Meanwhile, the clarifications of RODTEP are yet to be issued.
Leave a Reply