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China Fallen Into Deadend Road Has Faced Accumulated Stocks Of Chrome Ore
= Price Of High Grade Cr-Ore To Import Has Fallen To US$160 / Ton CIF
It is supposed that many stocks of chrome ore accumulated in the market of China have been held by traders. China imported 1,526,000 tons of chrome ore ( at US$203 per ton CIF on the average ) in the first half ( January - June ) of 2005 and also imported 2,147,000 tons of chrome ore ( at US$176 CIF on the average ) in the calender year ( January - December ) of 2004.

It is calculated that, at the stage of 2004, the quantity of chrome ore accumulated as stocks in China has come to more than one million tons. It was reported that China produced 2,360,000 tons of crude stainless steel in 2004, and the quantity of ferro-chrome consumed by China in 2004 on the basis of this report is calculated to be 685,000 tons on material base ( or 425,000 tons on Cr-content base ). In view of the fact that China imported 275,000 tons of ferro-chrome and exported 62,000 tons of this ferro-alloy in 2004, the quantity of ferro-chrome required to be produced in China came to 470,000 tons. The unit of chrome ore to be consumed for production of ferro-chrome is two tons of chrome ore against one ton of ferro-chrome and, accordingly, it is assumed that the actual quantity of chrome ore required by China for production of ferro-chrome in 2004 would be approximately 1,000,000 tons. ( As per the table attached hereto )

However, China imported 2,147,000 tons of chrome ore in 2004 and a differential of ore quantities between actual consumption and its imports became approximately 1,200,000 tons, which are estimated to be excessive stocks at the stage of 2004. This tendency was not resolved in the first half of 2005 and more than 800,000 tons of chrome ore are supposed to have been left without use. ( Note : In addition to ferro-chrome, China has been producing positively chrome metal and chrome chemicals and 50,000 - 100,000 tons per annum of chrome ore are consumed to produce these commodities. )

At present, an intention to import chrome ore into China is retreating and spot price of chrome ore has trended to become nominal for a considerable fall in the reality. High grade chrome ore ( Cr2O3 46 - 48% ) is now being offered at US$150 - 160 per ton CIF. When this chrome ore was booked 6 months ago, the price to be paid was US$225 per ton FOB.

The business to use excessive stocks of chrome ore for production of ferro-chrome to be exported from China to overseas markets is now facing a wall. The reason is that, reflecting the cutback of stainless steel production, spot price of high carbon ferro-chrome has fallen sharply from August. At present, spot price of Indian high carbon ferro-chrome is being offered at 55 US-Cents per lb. CIF. The reason, why spot price of Indian high carbon ferro-chrome has easily fallen to a lower level than 60 US-Cents per lb. CIF, is due to overproduction of ferro-chrome in India. Indian side denied the problem, which approximately 10,000 tons of distressed cargoes of this ferro-alloy have existed in India, but it has been rumored in Europe that 70,000 - 80,000 tons of ferro-chrome have been stocked in India.

In view of the fact that China imported chrome ore on a price level of US$200 per ton, the cost to produce high carbon ferro-chrome in China by using this chrome ore is calculated to come to 63 US-Cents per lb. FOB China ( US$869 per ton ) and, therefore, Chinese product is hardly possible to compete with Indian product. Even if China imports chrome ore at US$150 per ton, the cost to produce high carbon ferro-chrome will come to 53.3 US-Cents per lb., which corresponds to US$729 per ton . This calculation has been based on RMB Yuan 0.4 per 1 KWH of electric power fee but, when electric power fee of RMB Yuan 0.5 per 1 KWH applied to coastal area is used, the cost price of Chinese high carbon ferro-chrome becomes higher and is out of the question. Furthermore, when new duty as planned by the Central Government of China to impose on export of ferro-chrome from the 1st January of 2006 is enforced, an extent of the difficulties will be multiplied.

However, most of ferro-alloy producers in China had not participated in speculative imports of chrome ore. Accordingly, it is possible for these producers to purchase distressed cargoes of chrome ore at discounted prices from traders and, depending on a level of price for chrome ore to be purchased, Chinese producers will be able to enter into the international market of ferro-chrome. However, in this case, the price of chrome ore to be purchased will come to a level of US$100 per ton. If price of chrome ore falls to this level, Chinese ferro-chrome will be possible to exhibit its power to compete in the export market.

Nevertheless, price of South African chrome ore was 10% lower than those from other origins in the world for the past years but, in consequence of the currently strengthened exchange rate of South African Rand against US-Dollar, South African mining companies said that the cost to mine chrome ore in South Africa has risen and it is difficult for them to export chrome ore at US$100 per ton FOB, which is not profitable for them. The share of South African chrome ore in China is small but the factors to raise cost for mining of chrome ore at suppliers ( India, Iran and so on ) have accumulated.
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last modified : Mon 12 Sep, 2005 [10:28]
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