Indian ferrochrome prices escalated in the past quarter after Chinese production cuts got severe and major plants in Inner Mongolia faced shutdowns. However, now the market has turned bearish as the prices are falling in the Chinese market and the Indian market too followed suit.
Currently, prices in the domestic market are at around INR 92,000/t Ex-Jajpur, but a few bulk deals were concluded at slightly lower levels as well. Meanwhile, Indian ferrochrome suppliers found it very difficult to conclude deals in the spot market this week. SteelMint learned from its market sources that Chinese buyers were bidding at 95 cents/lb but producers in India have resisted selling below 98 cents/lb CIF China.
Key Highlights
Downtrending Chinese ferrochrome prices
Today, Chinese ferrochrome prices fell by RMB 200/t to RMB 8,150/t amidst tepid buying interest. Meanwhile, the production of ferrochrome in China has increased and is sufficient to cater to their domestic steel mills for now. Production in Inner Mongolia is still low and is expected to be further lower by around 50kt in this month. However, the Southern provinces could increase their output to benefit from higher prices.
Chinese demand in the spot market has tapered off
Chinese demand is lagging as the prices desired by them are much lower than the Indian offer levels. Meanwhile, the Chinese currency has also depreciated in the last week of March, which further dented the buying interest of the Chinese traders. An Indian ferrochrome supplier forecasted that prices in the Chinese market is set to fall further and the UG2 prices are also set to fall amidst higher inventory at the Chinese ports.
Indian Stainless-Steel mills push for lower prices
Chinese Stainless-steel mills have lowered their prices amidst falling demand. This has also discouraged the Indian stainless-steel producers to procure ferrochrome at higher levels and they are either withholding purchases or pushing for lower prices. Meanwhile, few ferrochrome smelters are hit hard by the increased production cost, which reduces the margin for lowering the prices. Few West Bengal based ferrochrome smelters are evaluating the option of shifting to manganese alloys for higher profit margin and bullish market sentiments.
Increase in production cost
Most of the producers of ferrochrome are from Odisha, and apart from IMFA and TSML most smelters are dependent on OMC for their chrome ore requirement and their production cost is close to INR 95,000/t. Meanwhile, power tariffs in Odisha increased by 30 paise, which is yet another blow on the distraught producers. According to one Jajpur based producer, this hike is expected to increase the production cost by INR 1000/t.
Market participants await chrome ore auctions
Producers and buyers of ferrochrome are both waiting for the upcoming OMC Chrome ore auctions to deduce the production cost. Meanwhile, there is an expectation in the market that the chrome ore prices will be reduced in line with the lower prices of ferrochrome.
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