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| HOME >> Topics List >> August, 2010 >> 30 (Mon) |
| Strategy Of FeCr Price For 4th Quarter 2010 Has Already Moved |
| = South African Producers Intend To Rise The Price, Wall Is Cooled Down Market In Europe |
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Since major producers in South Africa intend to rise price of charge chrome for shipments in the fourth quarter (October - December) of 2010, they have already moved to underpin spot price of high carbon ferro-chrome (charge chrome). One of the short-term measures is to buy out the cargoes of high carbon ferro-chrome (charge chrome) exported at discounted prices by Chinese and Indian producers, having caused to confuse the ferro-chrome market in Europe, and, in line with this operation, some of the traders concerned have actually participated in the action. The price of South African charge chrome for shipments to Europe in July - September quarter has been settled at 130 US-Cents per lb. of Cr on DDP base by a reduction of 6 US-Cents but, in view of the fact that South African producers have been suffering from high costs and unprofitable production, this settlement of the price has compelled South African side to make a severe judgment. At present, a tide of the strengthened exchange rate of South African Rand against US-Dollar (strengthened by 3%) is surging in South Africa. Under this situation, South African producers have aimed to return to the same benchmark price of 136 US-Cents per lb. of Cr at least as fixed for shipments to Europe in April - June quarter. Therefore, it is necessary for South African producers to rise the actual price of spot cargoes. Fortunately, spot price of high carbon ferro-chrome (charge chrome) has bottomed out mainly in China from the beginning of August and turned to a basic tone to rally to some extent. The domestic price of high carbon ferro-chrome in China is CNY8,800 per metric ton of material at present by a rise of CNY800 per ton from that in an early part of August. Owing to the high duty (20%) imposed on export of ferro-chrome from China, an overproduction of Chinese ferro-chrome in the first half of 2010 is unable to dispose of the excessive cargoes by exports and has caused to fall the domestic price in China but an unprofitable production of ferro-chrome in China has driven Chinese producers to rise their prices for sales. China has to import the whole quantity of chrome ore required as raw material for production of ferro-chrome and, accordingly, the cost to produce high carbon ferro-chrome in China is said to be higher than 100 US-Cents per lb. of Cr. However, in consequence of the dumping arisen in June to July, domestic price of high carbon ferro-chrome in China had fallen to a level of CNY7,800 per ton of material. This domestic price of high carbon ferro-chrome with Cr 50% min. is equivalent to 104 US-Cents per lb. of Cr. In case of high carbon ferro-chrome, containing 60% min. of Cr, this price on CNY base corresponds to 86.7 US-Cents per lb. of Cr. Both prices on US-Dollar base exclude value-added tax. However, 1,700,000 - 2,000,000 tons of chrome ore imported into China have been stocked at wharves in discharging ports and these stocks of chrome ore are durable to consume in China for 2 - 3 months. Therefore, a serious problem of the oversupply has been still left in China. Nevertheless, reflecting main factors to raise the cost for production of ferro-chrome, market price of high carbon ferro-chrome in China has autonomously entered into a rotary to rise and, as far as the countermeasures to manage Indian high carbon ferro-chrome sold at discounted prices in Europe and China by means of utilizing the weakened exchange rate of Indian Rupee against US-dollar and chrome ore produced by themselves are established, the route to stabilize the market of high carbon ferro-chrome will be possible to make up. If it could be materialized to stop the dumping of spot cargoes of high carbon ferro-chrome, a possibility to relieve a dissatisfaction held by stainless steel mills in Europe would come out. Stainless steel mills in Europe are currently taking a severe attitude for the contracts on South African charge chrome concluded for shipments in July - September quarter. ArcelorMittal has attempted to cancel part of the contracts. Also, ThyssenKrupp Stainless has proposed South African producers to carry over the contracts for July - September quarter to those for shipments in October - December quarter. The four major stainless steel companies in Europe have faced since last year a necessity to reregulate the excessive facilities for production of stainless steel and the matter to adjust the composition in production of stainless steel is in question to consider. Under the circumstances, the benchmark price of South African charge chrome for shipments in July - September quarter of 2010 has been settled at 130 US-Cents per lb. of Cr by a reduction of 6 US-Cents but, in view of the market situation at that time, which spot price of high carbon ferro-chrome was 20 US-Cents per lb. of Cr lower than the benchmark price as mentioned above, the consumers concerned are supposed to have been not satisfied considerably with this benchmark price. The spaces created by cancellation of the outstanding contracts and postponement of the shipments are thought to arise a possibility to give stainless steel mills a chance to purchase spot cargoes of high carbon ferro-chrome (charge chrome) at discounted prices. Even in Japan, Nisshin Steel has been enlarging the sources to purchase high carbon ferro-chrome from mainly South Africa to Kazakhstan and India. Needless to say, the benchmark price of South African charge chrome has been put in the composition of prices for stainless steel products (the system to calculate surcharge) and, in view of the operational strategy, stainless steel mills do not wish to see a substantial change of the benchmark price for charge chrome. Therefore, a reduction of 6 US-Cents per lb. of Cr for July - September quarter is an amicable compromise for both parties of suppliers and purchasers. However, the low cost was once a weapon for South African producers but, under the market situation at present, all of South African producers have been currently suffering from a loss for their production of ferro-chrome. Depending on a level of the benchmark price for South African charge chrome to be settled for shipments in October - December quarter, South African producers are supposed to have a strong possibility to maintain the structure to reduce their production of ferro-chrome as implemented in winter time (in July to August), which will be able to at once adopt the strategy to improve a balance on supply and demand of ferro-chrome and to minimize a loss as so far accumulated. If South Africa, having shared 38% in the world production of ferro-chrome, would transform to a swing producer of ferro-chrome, a possibility to fluctuate largely prices of ferro-chrome is suggestible. In order to stabilize the supply of South African charge chrome as a supreme proposition, stainless steel mills in Europe and Japan have wrestled with the matter of price for charge chrome and, from this point of view, the development as mentioned above has included a big risk. The subjects to purchase South African charge chrome at low prices and to ensure its stable supply had so far left some margins for South African producers but have now faced a large wall, which is an extraordinary situation to be not payable for South Africans to produce charge chrome. |
| last modified : Thu 02 Sep, 2010 [11:09] |
