India: Ferro chrome prices increase on supply crunch

• Prices increase on tight supply.
• Producers worry over oxygen supply issues.
• Chinese ferro chrome market stable.
• Chrome ore auctions receive poor response.
• Chinese demand lagging.
• Increase in Chinese production.

Indian ferro chrome prices increased late last week amidst an ongoing supply shortage in the domestic market. There are few ferro chrome producers left in the domestic market, since most have shifted to manganese alloys due to better profit realisations.

Currently, prices are stable at INR 85,500/t ex-Jajpur compared to last week. Many producers are holding on to their offers on oxygen supply worries. Smelters are trying to hold on to inventory to cater to the long-term contracts as they are uncertain over oxygen availability in the upcoming weeks.

Chinese ferro chrome prices were stable amid limited transactions as the market awaited the upcoming ferro chrome purchase tenders from the major stainless-steel mills. It is anticipated that the tender prices may drop marginally to spot levels.

Meanwhile, in India, OMC auctions received a poor response as only 10% of the total quantity was booked. The auctions have been continuously receiving poor response from the chrome alloy smelters, as the latter feel the prices are too high to sustain in a bearish market.

Producers reported that Chinese demand is still lagging and the uptick in prices is only because producers are holding inventory for their long-term contracts. Once the oxygen shortage eases, prices might go down again as there will be a huge oversupply in the domestic market, if exports don’t pick up.

Production of ferro chrome in China has increased in recent months, on shortage in the material seen at the beginning of the year, which pushed and prices sharply. The southern provinces ramped up their production capacities.

Meanwhile, China increased its imports of chrome ore by 30% month-on-month (m-o-m) in Apr ’21.

“The increased chrome ore imports to China are also suggestive of increasing production,” an Indian producer told SteelMint.

There is also a chance that the prices may sustain at these levels, as the South African power tariffs will push up prices. The UG2 prices are expected to increase, providing support to ferro chrome prices.