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| General Review Of Ferro-Chrome In 2005 And Its Outlook For New Year (1) |
| = Prices Have Fallen, South African Producers Have Multiplied Their Sense Of Crisis For Strengthened Rand Rate |
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The world output of crude stainless steel in 2005 decreased on the contrary to an expectation at the beginning of 2005 and came to 24.86 million tons as a slight decline of 0.3% from that in 2004. Nevertheless, only China produced 3.75 million tons of crude stainless steel in 2005, having increased by 67.8% compared with that in 2004. It is wondered whether the myth concerning a growth of stainless steel has collapsed or not. Many of the parties concerned have a view that the world production of stainless steel came to a standstill just for the phase of adjustment in 2005 but is anticipated to turn to a recovery from spring of 2006, but it is also certain that an extraordinarily increased production of stainless steel in China has put the brake on an expansion of stainless steel to be produced in the western countries. This tide on production of stainless steel had its turning point in July - September quarter of 2005, when the output decreased by one million tons ( 15.5% ) compared to that in the previous quarter = April - June, and prices of ferro-chrome turned to weaken from that time. The price of South African regular charge chrome was reduced by 5 US-Cents per lb. for shipments in July - September quarter of 2005 and that for shipments in October - December quarter was also finally reduced by 5 US-Cents per lb., while the negotiations had rough going and stainless steel mills, as consumers, insisted strongly on a reduction of the price. Furthermore, although South African producers resisted strenuously against the request from mills, the price of charge chrome for shipments in January - March quarter of 2006 has been settled by a reduction of 5 US-Cents again. Accordingly, the price of South African charge chrome was reduced successively for the three quarters from July - September of 2005 and has fallen by 15 US-Cents per lb. in total compared to that ( benchmark price of 83 US-Cents per lb. ) for shipments in April - June quarter of 2005, reaching the ceiling price. However, spot price of high carbon ferro-chrome, indicating directly the situation on supply and demand of ferro-chrome, already fell to 60 US-Cents per lb. from June - July of 2005 mainly for Indian and Chinese products and fell further to a level of 55 - 57 US-Cents per lb. in October - November, showing a weak tone of the price. Spot price of high carbon ferro-chrome in December had fallen to a nearer level to 50 US-Cents. Stainless steel mills in Japan once purchased sporadically spot cargoes of high carbon ferro-chrome but have entered into the cutback of their production and, consequently, held back to purchase spot cargoes. In addition, major stainless steel mills have asked South African producers to delay the shipments under the existing contracts. For a reference, the movements of price for South African charge chrome during from 1980 up to January - March quarter of 2006 were as per the table attached hereto. The total quantity of high carbon ferro-chrome ( charge chrome ) stocked at stainless steel mills in Japan as of the 30th November of 2005 came to 173,000 tons as the largest one in its history, which reached the stock rate of 2.5 months against the consumption in a month. In view of the fact that the cargoes imported into Japan but still stored at bond warehouses are supposed to be considerable, there is a possibility that the real stock would have reached to a scale of 3 months. The output of stainless steel products in Japan for the calender year of 2005 was 3.26 million tons as a decrease of 5% or 170,000 tons from that in the preceding year of 2004 but an increase of the production was expected at the beginning of 2005 and a differential of the quantities between an initial estimation and its actual production reached 400,000 tons. In anticipation of an increase on production of stainless steel in 2005, stainless steel mills had concluded the contracts to import high carbon ferro-chrome ( charge chrome ) and, accordingly, a balance of purchase and consumption became substantial A change of the battle on sales of South African charge chrome in Japan was seen in 2005. The quantities of South African charge chrome contracted by suppliers for shipments to Japan in 2005 are supposed to be <> BHP Billiton ( Samancor Chrome ) : 225,000 tons, <> Xstrata ( Glencore International ) : 110,000 tons, <> Hernic Ferrochrome ( Mitsubishi Corp. ) : 93,000 tons, <> others : 60,000 - 70,000 tons, and <> total : 490,000 tons. It was remarkable that Hernic Ferrochrome has expanded the capacity to produce charge chrome and succeeded in a sharp increase of the sales. This company produces charge chrome from UG-2 chrome as the basic raw material and the product has contained a higher silicon but its production cost seems to have lowered. Namely, Hernic Ferrochrome exhibits their power to be able to compete with other producers. Incidentally, in expectation of the demand for ferro-chrome from stainless steel mills which is forecasted to increase on a macro base, the producers in South Africa and Kazakhstan have been expanding their capacity for production of ferro-chrome. Following Hernic Ferrochrome in South Africa, which started to operate No.4 electric furnace ( to produce 160,000 tons per annum of charge chrome ) from autumn of 2005, Xstrata is scheduled to complete and operate the first phase of the Lion project ( to produces 360,000 tons per annum of charge chrome ), KazChrome of Kazakhstan , under the management of the ENRC Group, completed in October of 2005 the construction of a pelletizing plant ( to produce 400,000 tons per annum of pelletized chrome ore ) in the site of Donskoy chrome mine and is aiming to operate this plant on a substantial scale in the first half of 2006. As this plant pretreats chrome ore ( sintered ore ) as raw material, KazChrome targets to increase their production of high carbon ferro-chrome. Furthermore, in India where has been favored with a plenty of chrome resources, Jindal Stainless completed in January of 2006 a plant to produce 150,000 tons per annum of ferro-chrome in Orissa state. This ferro-chrome to be produced by Jindal Stainless is scheduled to be used by themselves and, therefore, 40,000 tons per annum of ferro-chrome produced by a subsidiary company of Jindal will be sold to the outside market. In advance of the situation which the market of ferro-chrome was going to be depressed, BHP Billiton materialized the sale of Samancor Chrome. This sale was planned from the second half of 2004 and Kermas became the successful bidder at this tender in June of 2005 by paying US$600 million. As of April of 2005, Kermas was already decided to be the company to take over Samancor Chrome but, in view of the circumstances at BHP Billiton, this sale to Kermas was officially determined in June. In the Chrome Division of BHP Billiton, Ferro-Chrome Department was already separated in spring of 2004 but a separation of Chrome Mine Department was not materialized and, accordingly, it took a certain time for the procedure. For a reference, Hanwa Co. Ltd. of Japan has financed Yen 4,000 million to Kermas and acquired the agency to sell charge chrome from Kermas in Japan. Through this financing, Hanwa has held a close relationship with natural resources as a trading company. |
| last modified : Tue 31 Jan, 2006 [10:40] |
