Prices of ferrochrome (ferro chrome) in China may face downward pressure next year, at least in the first quarter, with high volumes of ferro chrome flowing into China and expansions to smelting capacity in North China’s Inner Mongolia region taking shape, according to Zhang Junhong, a senior analyst on China’s chrome industry.
Speaking on December 3 at the 2021 Mysteel Ni-Cr-Stainless Steel-New Energy Annual Conference in Wuxi, East China’s Jiangsu province, Zhang said that large volumes of ferro chrome will continue to flow into China in Q1 2021 should the pandemic still raging abroad see shipments destined for other countries redirected to China.
Over January-September, China’s imports of high carbon Ferro chrome totalled 2.34 mn t, up 55,200t on year. The on-year increase, though relatively mild, was significant. This is because South Africa, the largest source of China’s ferro chrome imports, suspended a large part of its ferro chrome production due to a lockdown earlier this year in response to COVID-19, and production was not fully resumed in July, according to Zhang.
“Although production in South Africa was reduced, its exports to China increased, as demand in South Africa’s traditional destinations for its chrome alloy exports such as Europe and the US declined sharply,” he stated.
The latest data showed that South Africa’s Ferro chrome exports totalled 350 kt in November, of which 200 kt or 57% were shipped to China. Previously, the proportion was only around 50%, according to him.
Meanwhile, other countries including India, Brazil and Iran shipped more ferro chrome to China due to the fact that buying in Europe, US, South Korea and Japan – markets whose customers are normally willing to pay higher prices than China’s – slowed amid the COVID-19 pandemic.
In China, the expansion of domestic ferro chrome capacity, especially in North China’s Inner Mongolia, is also adding to concerns about oversupply. Many ferro chrome smelters in Inner Mongolia have plans to upgrade and expand their furnaces, Zhang disclosed.
“Many of them were granted (capacity) quotas by the local government, which will expire if the quotas are not used,” he said. Moreover, the government will also discount the electricity costs of those smelters operating large-volume furnaces, according to him.
In his presentation, Zhang pointed out that during last month alone, Inner Mongolia’s Xin Gang Lian Metallurgy Co commissioned a 42,000 t/year furnace, while Sichuan Yuanda Juhua Industrial Co commissioned a 48,000 t/year unit and another 33,000 t/year furnace, and has plans to bring on yet another 33,000 t/year of capacity soon.
Meanwhile, Inner Mongolia Shangtai Industrial Co, which operates four furnaces for ferro-nickel, plans to convert one to ferro chrome production and expand it to 48,000 t/year in December, Zhang shared.
Ferro chrome output of Inner Mongolia in H2 next year will reach at least 400kt, equivalent to the region’s total output throughout all of 2019, according to Zhang. In 2019, China’s total high carbon ferro chrome production reached 6 mn t.
As of December 3, Mysteel assessed the spot price of ferro chrome with 55% Cr content in Inner Mongolia at Yuan 5,750/t ($879.2/t) EXW and including the 13% VAT, down Yuan 400/t on year.
“Were it not for the lockdown announcement of South Africa which triggered concerns over (Cr concentrates and ferro chrome) supplies, the price may well have fallen to around Yuan 5,100/t,” Zhang commented.
Though candidly acknowledging the factors that may weigh down ferro chrome prices in Q1 next year, Zhang stressed that he does not think prices will fall sharply. “Chinese stainless steelmakers are now wiser and will be cautious when tabling their bidding prices,” he said.
So long as the production and profits of Chinese stainless steelmakers remain healthy, they will not put too much pressure on prices of their raw materials, according to Zhang.
(This article has been published under the article exchange agreement between SteelMint Research and Mysteel Global.)
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