It has not been even two days after the Christmas and Chinese ferrochrome market has been given a Christmas gift of the marginally bolstering tender prices or 200 CNY m-on-m gain to be precise. Taking into account that different market members and analyst have been voicing a wide range of prediction, positive gains in tender prices do seem like a positive thing.
However, a quick glance at the latest chrome market stats signal to hold the horses despite all typical for the Christmas and the New Year period enthusiasm being upon us.
China’s chrome ore imports remained well above 1 million tonnes since August 2017. My estimations suggest it should remain above 1 million tonnes for December too. A rump up in deliveries naturally resulted in a staggering growth of domestic FeCr production for the same period. Despite, a rather stable level of imports of foreign FeCr, the actual share of the chrome units demand supplied by China’s domestic Hc FeCr producers has exceeded 80% for the first time ever (about 85% in November). Needless to say, that locally produced, as well as FeCr imports are accumulating in China creating an overhanging inventory.
November stainless crude steel output in China has declined, with 300 series taking the largest hit.
Such a decline in production corresponds to a loss of about 30,000 of HC FeCr consumption in November on an m-on-m basis. December domestic production of HC FeCr has retreated by some 43,000 tonnes suggesting SS mills were utilizing November month stocks, from domestic producers and imports alike. Combining that with almost a complete withdrawal of new South African FeCr arrivals into China during December would allow assuming an attempting for the market to rebalance. That, in turn, should theoretically justify witnessed today tender price gains.
The outlook, on the other hand, remains obscure. The FeCr deliveries ex-SAR are expected to return to November levels in January. A widely discussed justification for the current tender increase on the South African Rand appreciation, along with the price increase by the major sellers in SAR can be seen as one of the main reasons for tender price growth. However, more expensive ore has to reach China first, approximately by February, not mentioning that the crude output is historically at the lower levels in January/February.
Courtesy: This article is written by Roman Kucinskij – A seasoned and driven metals & mining analyst with an inquisitive mind. Author of a number of industry acknowledged strategic market outlook publications.
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