Indian ferro chrome producers inched up their offers by INR 1,300/tonne w-o-w post-active participation in Vedanta’s ferro chrome auction held on 10 May 2022.
As per SteelMint’s assessment on 12 May, most producers offered at around INR 127,000-128,000/t exw-Jajpur despite weak demand in the domestic market. The price increase was also propelled by fears that producers’ profit margins might narrow post-sales of coal by Mahanadi Coalfield Limited at higher prices.
However, buyers were reluctant on booking material at higher prices, pressurizing producers to lower their offers up to INR 124,000-125,000/t exw-Jajpur due to the downtrend in stainless-steel prices w-o-w amid weak demand. Currently, 304 grade stainless steel cold rolled coils (CRC) are being offered at around INR 285,000/t exw, Mumbai — down by INR 4,000-5,000/t w-o-w, as assessed by SteelMint.
Why are producers not willing to reduce offers?
As a result of the increase in electricity prices after the MCL coal auction, producers with captive power plants offered higher prices. Nevertheless, grid-based plants have relatively low production costs, but a power outage forced them to raise the prices.
Currently, only a handful of producers are operating at full capacity and catering only to the domestic market. Although activity in the exports market remains nearly absent, this has had little or no impact on the Indian ferro chrome industry in the past two weeks amidst supply crunch, which has actually led to the uptrend in prices.
In addition, Vedanta’s ferro chrome auction received good response with 3% hike on the closing prices (INR 127,200/t) against the base price as most of the market participants were anticipating further hike in ferro chrome offers.
Furthermore, chrome ore prices still remain high at around INR 20,000/t for 52-54% grade. This further encouraged smelters to raise prices.
China market review
Chinese ferro chrome prices remained stable w-o-w at RMB 9,950/t, exw-Inner Mongolia. The downstream stainless steel user segment was showing signs of a decline, and in wait-and-watch mode. It is expected that the ferro chrome market will remain stable in the short term.
Outlook
In the short term, ferro chrome prices are expected to remain stable as steel plants are undetaking production cuts in several states due to power shortage. However, the high cost of production could allow ferro chrome producers to keep their offers high despite limited demand.
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