India: Higher ferro chrome prices find acceptance in the market

• Prices increase in the domestic market.
• Vedanta auctions establish higher prices.
•  Supply crunch prevails. Chinese demand lags behind
•  Prices likely to be short-lived.

Indian ferro chrome prices increased significantly by INR 6,500/tonne (t) week-on-week (w-o-w) to INR 92,000/t after Vedanta’s ferro chrome auctions held late last week. In the exports market as well, the smelters increased their offers to cents 93/lb for CNF China, but deals are yet to be concluded. Buying interest from China is dull.

Vedanta’s auctions have set the tone for the domestic market. Initially, the market remained bearish, with most buyers expecting prices to go down. However, due to supply shortage in the market, the auctions received an overwhelming response. All the material was sold out at around INR 90,000/t for 10-150 mm size. After the auctions were concluded, the domestic producers increased their offer prices considering the supply-demand mismatch.

Most of the buyers are speculating prices will go down further amidst slow demand from the Chinese buyers. However, due to higher prices of chrome ore, many producers have lowered their production levels, while bigger producers are worried about supply of oxygen and, therefore, have kept their material for long-term contracts. This is creating a severe shortage in the material.
Chinese demand for ferro chrome from India is waning as buyers are shifting to other markets.

Meanwhile, the required quarantine period of vessels is also increasing the demurrage costs for the Chinese importers, which is further hampering demand from China. It is expected that due to increasing Chinese stainless-steel prices, demand may pick up next week. Thus, most exporters are firm in their offers and are in a wait-and-watch mode.

Indian buyers are of the view that prices will be short-lived, as the export market is lagging. Also, in the domestic market, demand is slow from the stainless-steel buyers. However, due to supply-demand mismatch, buyers are also waiting to see how the market reacts in the coming week.