Chrome Ore Overseas Futures Prices Fall: Can the Chrome Supply-Demand Mismatch Be Eased? [SMM Analysis]

Published: Sep 02, 2024 10:17 (GMT+8)

Source: SMM

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After a slight increase before the announcement of ferrochrome bidding prices by steel mills in September, chrome ore futures prices have fallen again.

After a slight increase before the announcement of ferrochrome bidding prices by steel mills in September, chrome ore futures prices have fallen again. The futures price for South African 40-42% chrome concentrates has dropped to $300/mt, down $15/mt from the previous price, with a trading volume of 195,000 mt. The expected shipping date is late October, with arrival in late November. Recently, the arrival cost of South African concentrates remains high, with many sources previously traded at $310-320/mt. Additionally, chrome ore port inventory remains sluggish, with a monthly inventory-to-sales ratio of less than 1.3, indicating tight supply. Despite this, the expectation of production cuts among ferrochrome manufacturers is not strong, and domestic operating rates are still acceptable, maintaining high demand for chrome ore.

The bidding price of high-carbon ferrochrome by steel mills in September fell by 200 yuan/mt (Cr 50%), leading to widespread losses among domestic ferrochrome manufacturers. Moreover, recent stainless steel consumption has been weak, and market expectations for the future are generally pessimistic, making ferrochrome manufacturers cautious about purchasing spot chrome ore.

Although the current supply of chrome ore is tight, the ferrochrome market is already experiencing a severe surplus. If the demand for chrome raw materials during the stainless steel peak season is insufficient, the surplus in ferrochrome during the traditional off-season from November to February could put pressure on prices, forcing some ferrochrome manufacturers to cut or reduce production, thereby rebalancing the supply-demand relationship. At present, overseas chrome ore futures have completed their decline, and domestic demand for chrome ore has not yet shown a significant drop. Coupled with low chrome ore inventory support, the short-term expectation is that spot prices will gradually align with futures prices, with strong support below. However, in the medium and long term, the domestic chrome supply-demand relationship remains quite imbalanced, and ferrochrome manufacturers are already experiencing losses, with high profit margins in the chrome ore segment, indicating a potential for future adjustments.

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