SMM High-Carbon Ferrochrome Market June Review and July Outlook

SHANGHAI, Jul 5 (SMM) - The price of high-carbon ferrochrome fell steadily in June, and the average price of high-carbon ferrochrome in Inner Mongolia fell by 400 yuan/mt (Cr50%) in the month. As of June 30, the prices of high-carbon ferrochrome in Inner Mongolia were 9,000-9,200 yuan/mt (Cr50%), and 9,100-9,300 yuan/mt (Cr50%) in Sichuan. At the end of June, Tsingshan Group announced its high-carbon ferrochrome bid price for July at 8,995 yuan/mt (Cr50%), down 650 yuan/mt (Cr50%) from June.

Supply side: High-carbon ferrochrome plants suffer losses based on spot raw materials, while their inventory of low-priced raw materials is gradually depleted. Many high-carbon ferrochrome plants have indicated that they have plans to reduce or stop production this month.

The operating rates of high-carbon ferrochrome plants remained high in June, and the supply was ample. In July, spot high-carbon ferrochrome prices fell along with bid prices. Although the price of chrome ore also fell, ferrochrome plants, especially those in the south, suffered big losses, forcing them to lower or stop production. As such, high-carbon ferrochrome supply may decline in July. 

On the demand side, the downstream consumption of stainless steel was weak. Stainless steel mills showed little interest in high-priced raw materials due to losses and high inventory of finished products. Under the pessimistic market expectations, traders were relatively cautious in their purchases, and the overall transaction situation was poor. Since July, there have been frequent reports of production cuts by steel mills. With the continuous decline in stainless steel production, the demand for ferrochrome has further decreased, and the oversupply of ferrochrome may further deepen.

Cost side: The price of coke rose first and then fell in June, and is at a recent low. As of the end of June, the price of secondary metallurgical coke in Inner Mongolia was 2,750 yuan/mt. The price of chrome ore has gradually dropped, despite tight supply and low port inventory. The decline in chrome ore prices was caused by poor demand and sell-off by bearish traders. Chrome ore prices may remain weak amid pessimistic market expectations. 

In July, the price of ferrochrome may still have some room for decline due to poor end demand and weaker cost support. The demand for ferrochrome may not recover until September when the peak season arrives and economic stimulus policies begin to have a positive impact on end demand.