Review of Ferrochrome in October and Outlook for November [SMM Analysis]

In October, high-carbon ferrochrome prices further declined. Major stainless steel mills significantly reduced the bidding prices for high-carbon ferrochrome by 400 yuan/mt (50% metal content), with Tsingshan's high-carbon ferrochrome bidding price dropping to 8,295 yuan/mt (50% metal content). At the beginning of the month, driven by favorable macro policies, the stainless steel futures market performed strongly, leading to an increase in spot stainless steel prices, thereby restoring the profitability of steel mills and weakening expectations for production cuts. Additionally, influenced by the October steel mill tenders, ferrochrome prices had significantly decreased, causing some ferrochrome manufacturers to incur losses, leading some to halt production, cut production, and conduct equipment maintenance. It is expected that ferrochrome supply will decrease this month, and market expectations for further significant price declines will weaken. However, the ferrochrome market still faces a relatively severe annual surplus, with sufficient raw material inventory at stainless steel mills. Coupled with expectations for production cuts, pressure on chrome ore has increased, leading to a decline in ore prices and a subsequent decrease in the cost base of ferrochrome, causing ferrochrome prices to remain weak.

At the end of October, TISCO and Tsingshan Group successively announced their high-carbon ferrochrome bidding prices for November. Due to differences in raw material reserves and production plans, the bidding prices of the two major stainless steel mills diverged for the first time in two years. TISCO's high-carbon ferrochrome bidding price decreased by 150 yuan/mt (50% metal content) to 7,945 yuan/mt (50% metal content), while Tsingshan's price decreased by 200 yuan/mt (50% metal content) to 8,095 yuan/mt (50% metal content). As bidding prices continued to decline, retail prices had to align with them, leading to losses for ferrochrome manufacturers. The further compression of prices prompted ferrochrome manufacturers to increase production cuts and maintenance plans, resulting in a decrease in supply. However, with the arrival of the year-end off-season, although stainless steel mills maintained relatively high production levels, the likelihood of further significant production increases was relatively small, and the previous surplus supply of high-carbon ferrochrome would take time to digest. Additionally, production cuts exacerbated the sales pressure on chrome ore, with the futures price of South African 40-42% chrome concentrates falling to $270/mt. As low-priced chrome ore gradually arrives at ports, domestic spot ore prices will also gradually decline, destabilizing the cost support for ferrochrome. Under the combined pressure of year-end sales and expectations for cost reductions, it is expected that ferrochrome manufacturers' profits will be difficult to secure, and the market's short-term outlook remains generally pessimistic, with the weak ferrochrome price situation likely to persist throughout the year.