The chrome market has been witnessing continuous ore price decline but, except for RSA concentrate 42% at low costs, there is no apparent improvement in buying in other ore types, regardless of low offers. In this month, the decline in HC ferrochrome has so far exceeded RMB300 (USD 43)/50 basis per ton, leading to a lack of confidence in later market trend and cautious position to purchase. The whole chain of chrome industry is generally having weakened confidence in the market and participation enthusiasm hampered.
1. The spot price of Chrome ore: with year-end drawing closer, due to the varied pressure of different Chrome ore traders on holding cargo and capital strain amid different outlooks, the market showed notable stances for quick sales at low price prompting an escalated decline in Chrome ore spot prices. With such traders clearing out their inventory, the remaining ore holders are no more willing to slash the price. Take the RSA concentrate 42% as an example, the apparent inversed costs of port spot against oversea offers have encouraged some plants to purchase more low-cost resources leading to stabilization of 42% concentrates. Nevertheless, the overall bearish outlook on the later chrome market, the long run inverse pattern in prices of spot and oversea offers limits the wiggling room. Meanwhile, though the mainstream lumpy Chrome ore has shown slow pace and swathes in decline, it stands a chance for further downslide with continuous deterioration.
2. Traders hesitated on future delivery purchase. The root cause for this is due to the yet to have emerged stimulus in the market and the weak pattern may sustain if there is no clear signal for better turn and its time. Besides, the recent downward adjustment on oversea offers has left little room for traders. This coupled with the fact that port inventory after the national holiday has climbed from 3.1million tons to 3.3million tons, of which half being planted own stock pending to be consumed, has undermined traders’ confidence for more purchase.
3. The HC ferrochrome is still the dominant element for the bearish outlook. The inquiries on ferroalloys are sluggish and transactions are scarce. The low transitional price has built up plants’ negative outlook for the Dec market. The plants in south China already run loss and only those alloy plants in north China purchasing port spot have little margins. At present, some alloy plants look to steel mills’ winter stock-up which actually is waning year after year and at present, the decline in stainless steel is still on the go, with some planning to cut production. However, it is general positions among mills to see other mills to cut production first which contributes to the high output of alloy.
4. The stainless-steel market has entered into off-season featured with inactive transactions and factors like LME nickel decline and sliding micro-economy have led to slow-paced sales and weak operation of stainless steel. Approaching to year-end, besides ore traders and alloy plants, some stainless-steel mills are also facing capital strain with some scheduled maintenance, resulting in less demand in alloys and pressure on alloy prices. The supply-demand situation is still the paramount factor affecting alloy prices.
As the market stands, the whole chrome chain is dominated by bearish elements. No other obvious stimulus except for a high operating rate from downstream. This is particularly true for alloy, which is likely to experience further decline amid short sell outlook for Dec tenders. Hence the ore price in the short run may fluctuate at low levels.
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