High-Carbon Ferrochrome August Review and September Outlook [SMM Analysis]

In August, high-carbon ferrochrome prices further declined. As of August 30, the ex-factory cash price for high-carbon ferrochrome natural lump in Inner Mongolia was 8,500-8,700 yuan/mt (Cr50%), down about 100 yuan/mt (Cr50%) within the month. The mainstream stainless steel mills' bidding prices for high-carbon ferrochrome broke the calm since April this year, dropping by 100 yuan/mt (Cr50%). The bidding price for Tsingshan's high-carbon ferrochrome was 8,895 yuan/mt (Cr50%). Due to the high operating rate of ferrochrome manufacturers and the high volume of ferrochrome imports, domestic ferrochrome supply was significantly excessive, leading to sluggish retail ferrochrome sales. The market retail ferrochrome prices had already fallen below the bidding prices. However, due to weak stainless steel consumption, the ferrochrome market generally held a pessimistic outlook for the future, and low prices did not alleviate the sluggish retail ferrochrome sales within the month.

In August, the smelting cost of high-carbon ferrochrome dropped back slightly. As of August 30, the spot raw material cost in Inner Mongolia was 8,612 yuan/mt (Cr50%), down 130 yuan/mt (Cr50%) MoM, a decrease of 1.48%. Under the spot raw material cost, the retail ex-factory price of ferrochrome manufacturers in Inner Mongolia brought about 12 yuan/mt (Cr50%) in losses. Regarding coke costs, coke prices completed five rounds of decline within the month, down 250 yuan/mt MoM. As of August 30, the coke cost for high-carbon ferrochrome smelting was 825 yuan/mt. The electricity cost remained stable within the month, with the electricity cost for high-carbon ferrochrome smelting at about 1,584 yuan/mt as of August 30. Regarding chrome ore costs, driven by the recent September steel bidding, chrome ore prices followed the downward trend. However, overall chrome ore inventory remained low, and ferrochrome manufacturers had limited production cuts. Although ferrochrome manufacturers were reluctant to accept high-priced chrome ore, the tight supply of chrome ore made them passive, limiting the price decline of chrome ore. As of August 30, the chrome ore cost for high-carbon ferrochrome smelting was about 5,877 yuan/mt. Overall, the prices of coke and chrome ore fell, reducing the cost of ferrochrome. The oversupply situation of ferrochrome meant that the ferrochrome price was strongly supported by costs, and the cost decline further lowered the ferrochrome price.

In September, ferrochrome bidding prices by steel mills further dropped by 200 yuan/mt (Cr50%), with Tsingshan's high-carbon ferrochrome bidding price at 8,695 yuan/mt (Cr50%). Although the traditional peak season for stainless steel consumption approaches in September, the current social inventory of stainless steel remains high, and there are no significant signs of strengthening stainless steel consumption. The profit margin of steel mills is narrow, making it less likely for them to purchase high-priced chrome raw materials, which are already in surplus. Recently, there have been market rumors that a southern steel mill has been purchasing at 150 yuan below the August bidding price. Given the weak supply-demand relationship of ferrochrome and the lack of a strong peak season, the ferrochrome market holds a pessimistic outlook for the future. It is expected that in the short term, supported by losses, the decline in retail ferrochrome prices will be relatively slow. Future attention will still be on actual stainless steel consumption and steel mill production plans.