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Expectation To Rise Price Of Charge Chrome For Q4 / 08 Recedes
= Spot Price Falls To Lower Level Than Benchmark Price
It seems that an expectation to rise price of South African charge chrome for shipments in October - December quarter has receded. Depending on a further movement of the market situation, stainless steel mills are supposed to negotiate with suppliers on a request to reduce the price.

The reason is that spot price of high carbon ferro-chrome (charge chrome) has fallen to a lower level than benchmark price. The benchmark price of South African charge chrome settled with Japanese mills for shipments in July September quarter is 213 US-Cents per lb. of Cr CIF and that fixed in Europe for July - September quarter is 205 US-Cents per lb. of Cr on DDP (delivered and duty paid) base, which has risen by 13 US-Cents per lb. of Cr compared with that for the preceding quarter of April - June.

However, reflecting a fall of price for high carbon ferro-chrome arisen in domestic market of China, the market of this ferro-alloy has been depressed in Asian region and some cargoes of Indian high carbon ferro-chrome, having missed to sell, have now taken the offensive to dispose of Indian product at discounted prices in spot market. This movement has caused to weaken price of high carbon ferro-chrome in spot market. The domestic price of charge chrome with Cr 50% min. in China has fallen to a level of 183 US-Cents per lb. of Cr and, following this weakened price, Indian high carbon ferro-chrome is now being offered with a further discount of 10 - 20 US-Cents.

As regards the reason, why consumers' side has agreed to a rise of 13 US-Cents per lb. of Cr for South African charge chrome to be shipped in July - September quarter, a leading stainless steel company said that the price settled for April - June quarter was restricted to a comparatively moderate extent and a remainder of the rise has been adjusted in the price for July - September quarter.

South Africa is a major country to produce charge chrome but fee of electric power in this country has been decided on the end of June to raise by 27.5% (initially planned to raise by 14%) for 2008 and factors to increase production costs have still existed in South Africa. However, the measure to reduce volumes of electric power to be supplied to industries by 10% was once worried but, as far as the production of ferro-chrome in South Africa for the first half of 2008 is concerned, an influence of this reduced power supply did not come up to the surface with a serious impact .

Contrarily, because of the rationalization implemented at South African producers and the concentration of production on ferro-chrome arranged by South Africans, the output of ferro-chrome in South Africa for the first half of 2008 had an increase compared with that in the same period of 2007. Xstrata Alloys produced 615,000 tons of charge chrome in the first half of 2008, having increased by 3% compared to that in the same period of 2007. In order to avoid a decline of the production in the first half of 2008, other South African producers are supposed to have made appropriate arrangements. Also, in the second half of 2008, new facilities to produce ferro-chrome are scheduled to be operated successively in South Africa.

The Tata Iron & Steel Co., Ltd. (Tisco) of India constructed two new electric furnaces at the plant in Richards Bay of South Africa and, following the operation of No.1 electric furnace commenced from the 1st April of 2008, is scheduled to operate No.2 electric furnace from August of this year. Samancor Chrome installed new plasma electric furnace (M-4 plasma furnace) at the Middleburg plant and is scheduled to operate this new plasma furnace in July - September quarter. Accordingly, the capacity to produce ferro-chrome by these three electric furnaces is estimated to be 230,000 - 240,000 tons per annum.

Also, ASA Metals has been constructing two large 66 MVA electric furnaces at the plant in Dilokong of Limpopo state and already completed 26% of the whole with a target to complete all facilities in 2009.

On the other hand, owing to a sharp fall of nickel price, the world production of stainless steel, which was initially expected to recover in the second half of 2008, has a strong probability to postpone a recovery and there is an opinion in the market that a growth on global production of stainless steel in 2008 will be more or less of 5%. Also, an analyst has made a warning signal for a recovery of stainless steel production to be expected in the first half of 2009.

The price of South African charge chrome had risen for the successive three quarters from January - March quarter of 2008 but, as far as a rise of price for October - December quarter of 2008 is concerned, a possibility to make a pause is becoming certain.
last modified : Mon 11 Aug, 2008 [10:45]
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