Indian ferro chrome prices fell further by around INR 2,250/tonne week-on-week (w-o-w) to INR 80,000/t ex-Jajpur amidst higher selling pressures.
Meanwhile, Chinese demand from the spot market has waned, fuelling further unrest in the market.
Key highlights
Chinese ferro chrome market optimistic
The Chinese ferro chrome market turned optimistic as prices rose this week by RMB 50/t amidst increasing stainless steel prices in China. Due to higher prices of stainless steel, inquiries increased for ferro chrome, a trend that was also reflected in the transactions. Currently, prices in Inner Mongolia are ruling at RMB 7,300/t ex-works.
Chinese demand waning
Chinese demand for Indian ferro chrome is waning due to several factors. The country is more focused on procuring its domestic material owing to increased production. Production of ferro chrome in May is expected to increase further by around 4.5 kt to approximately 40 kt.
Meanwhile, imports from South Africa and Kazakhstan have increased significantly in the past few months, which is also a detrimental factor for India, the third biggest exporter of ferro chrome.
According to Customs data, Kazakhstan exported around 154 kt of ferro chrome in Mar ’21, up 29 kt compared to the previous month. Meanwhile, around 49% of the total exports was made to China, which accounted for 74,820 t in Mar ’21. In Q1 CY21, China remained the largest importer of Kazakhstan’s ferro chrome with around 63% of total exports.
Ambiguity over lockdown in India
There is a rising ambiguity over lockdown amidst increasing Covid cases in India. As patients suffocate for lack of oxygen, industrial supplies are being diverted for medical use. Thus, a number of stainless-steel units have either shut down or have reduced their production drastically, in the process, reducing domestic demand for ferro chrome.
“Though use of liquid oxygen is not a necessity in the main manufacturing process, it plays crucial role in the production process. Thus, if the situation does not improve, chances are that even the ferro chrome plants may start cutting down on production,” said a ferro chrome producer.
“We are currently trying to keep higher inventory levels to cater to the long-term contracts. Because, with the increasing number of cases and higher chances of lockdown, comes the challenge of labour availability and dispatches issues,” said another ferro chrome producer.
Smaller ferro chrome units switch commodities
Many small ferro chrome producers switched from ferro chrome to manganese alloys amidst better profit margins. According to market sources, smelters without captive source of ores are finding it increasingly challenging to sustain in a down-trending market because of the increased chrome ore prices, higher coke and electricity costs in Odisha. Meanwhile, manganese alloys smelters have been making consistent profits due to lower ore prices and higher demand in the market. However, major producers located in Odisha are not willing to shift in line with the long-term commitments.
Outlook
Producers remain optimistic after the improvement in the Chinese market. However, demand from China remains almost absent in the spot market. Meanwhile, buyers are in a wait and-watch mode as they wait for the next round of tenders in anticipation of a further fall in the market.
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