| The TEX Report Topics < Ferro Alloys > | |
| HOME >> Topics List >> February, 2009 >> 27 (Fri) |
| Irrationality Of FeCr Stocks Is Enlarging In Internal And External Markets |
| = Japan Suffers From Overstocks, Europe Moves To Resume Purchases As Results Of Substantial Cancellations |
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Stainless steel companies in Europe have entered into the structure to reduce considerably their production of stainless steel from October - December quarter of 2008 but some of them have shown a sign to recover the production on a basic tone from March - April of 2009 and are supposed to have taken a certain concrete form for their de-stocking of ferro-chrome. Naturally, these European stainless steel mills are expected to resume their purchases of ferro-chrome. Stainless steel companies in South Korea and China have kept a similar step to that of European mills and, accordingly, are moving to purchase spot cargoes of ferro-chrome at lowered prices. On the other hand, stainless steel companies in Japan have been still suffering from the overstocked cargoes of ferro-chrome, because they have to do the considerable reappraisal of raw materials for stainless steel production in preparation for settlement of accounts to be closed on the 31st March of 2009. The index price of high carbon ferro-chrome (charge chrome) has fallen from 193 US-Cents per lb. of Cr to 87 US-Cents and, therefore, it is inevitable to have to reckon a large loss anticipated to arise from the reappraisal. In view of a sharp fall of nickel price, a loss to arise from the reappraisal of raw materials is estimated to be more than Yen 10,000 million or Yen 3,000 million as the minimum for one company. The total quantity of high carbon ferro-chrome stocked at stainless steel companies in Japan as of the 31st December of 2008 came to 184,000 tons, which were certainly the largest stocks in its history. The stainless steel industry of Japan consumed 36,000 tons of high carbon ferro-chrome in December of 2008 and, consequently, its stock rate became higher than 5 months. The industry produced 150,000 tons of stainless steel products in December of 2008, which decreased to the level in 1980 and became an extraordinary situation. In addition to the stocks of ferro-chrome at stainless steel mills in Japan as seen from the statistics, the cargoes, which are under sea transportation and not made yet its customs clearance, have existed. Therefore, there is a view in the market that, on the basis of ferro-chrome consumption at present, its stock rate will reach 7 - 8 months. A differential of the stocked cargoes of ferro-chrome between Japanese mills and European mills has been variously pointed out but a conclusion of this differential is that stainless steel companies of Japan have respected the conditions as contracted and received ferro-chrome under the contracts. On the other hand, stainless steel companies in Europe and South Korea had taken the drastic countermeasures for purchases of raw materials in October -- December quarter of 2008 in order to cope with cutback of stainless steel production. Namely, they had cancelled the contracts or requested to delay shipments. The basic difference of ferro-chrome between Europe and Japan is due to the location of South Africa, where is the base to supply ferro-chrome. In addition, Europe has held the base to stock ferro-chrome in Rotterdam and set up the system to deliver ferro-chrome from warehouses in Rotterdam immediately upon instructions. On the other hand, Japanese mills have wholly relied on straight imports of ferro-chrome from South Africa by means of operating large vessels. It will take about two weeks for ocean transportation from South Africa to Europe and, on the other hand, it is necessary to take 1.5 months for ocean transportation from South Africa to Japan. Furthermore, Japan has no function to pool ferro-chrome as performed in Rotterdam. Japan imported 887,000 tons of high carbon ferro-chrome in 2008, consisting mainly of 456,000 tons from South Africa, 291,000 tons from Kazakhstan, 97,000 tons from India and 33,000 tons from Zimbabwe, and the imports from Kazakhstan in 2008 increased to a large extent. Eurasian Natural Resources Corporation (ENRC), as the producer of Kazakhstan's high carbon ferro-chrome, has been using Qingdao port of China from several years ago to ship ferro-chrome for Far Eastern countries and has shifted largely their shipments from Baltic ports (its ocean transportation takes more than 2 months) to Qingdao port, which is only the base to be able to shorten a distance for transportation in order to compete with an advantage of Europe. The background, which ENRC has succeeded in using Qingdao port, is close connection and reliance between the Governments of Kazakhstan and China and it is easy to imagine that another power from simple strategic sales will work on this measure. The serious case, which stainless steel companies of Japan have been suffering from the large stocks of high carbon ferro-chrome, has been closely connected with the strategy for purchases of raw materials, which has aimed to ensure and bring up " sustainable sources " . Stainless steel mills in Europe had taken the same stance as that of Japan before October - December quarter of 2008. However, since steel companies of Europe have been consolidated in many cases, the culture at European mills to respect contracted terms on purchases of raw materials has collapsed at present and, under this situation, the culture held by Japanese mills for purchases of raw materials is questioned again. Japan does not have natural resources and, therefore, has been involved in a large risk for purchases of raw materials but it is supposed that the countermeasures for self-defense, which are to deepen and thicken close connection with the producer, having operated the base to stock ferro-chrome for deliveries to Far Eastern countries including China, and to maintain a flexibility, will come up with a close-up at stainless steel mills' side. |
| last modified : Wed 04 Mar, 2009 [10:21] |
