Indian ferrochrome prices spiked substantially in the past two months on the back of bullish sentiments in the Chinese market. Prices of ferrochrome have been stable for the past two weeks, in line with firm chrome ore prices and circumspect buying interest from the Stainless-steel producers, both in the domestic and export markets.
Subdued buying interest is due to a confluence of following factors:
Chinese tender prices are expected to go down
Chinese tender prices are expected to go down amidst weakening stainless steel prices. Though the supply gap of ferrochrome still remains the same, with the recent fall in Nickel prices (LME: $16,131/t), the buying sentiment is weak from the stainless-steel mills in China. The steel mills are more inclined towards procuring scrap to reduce the consumption of ferrochrome in china. Spot market witnessed a marginal slide in ferrochrome prices strengthening the sentiment that the prices would fall is the near future.
Indian Stainless-steel mills worried about pricing
Indian stainless-steel mills have lowered their prices as they are wary of the removal of the anti-dumping duty. According to stainless steel manufacturers, this is intended to increase imports and bring down the prices. Therefore, such higher prices of ferrochrome are now unacceptable in the market as they believe that the prices would come down in the coming weeks after Chinese mills announce their tender prices. Today Vedanta’s (FACOR) ferrochrome auctions received no bids making the picture clear that buyers are not confident to procure at such prices.
Chinese buying remains muted
Indian exporters are facing a lull in the exports market in the face of subdued Chinese buying. Most Chinese producers are willing to buy from the domestic market and are less interested in importing ferrochrome as they believe that the prices might come down by the time the shipments arrive. Indian producers say that even at cents 107/lb., buying interest from China is lagging.
Increased production of ferrochrome in China
Chinese stainless-steel production is increasing which has created more room for ferrochrome market. However, there has been a substantial increase in Chinese domestic ferrochrome production. Although the major producing region of Inner Mongolia continues to remain affected, the other regions are vying to fill the gap. This is making the Indian ferrochrome producers cautious as China is the biggest buyer of Indian ferrochrome.
Outlook
Ferrochrome prices are under pressure as buyers turn cautius and trading is subdued. We anticipate ferrochrome prices to correct marginally as high cost of chrome ore will not provide the sellers to reduce ferrochrome prices substantially to generate better sales.
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