The TEX Report Topics < Ferro Alloys > Home
HOME >> Topics List >> March, 2012 >> 13 (Tue)
FeCr Price Twisted Between Europe And China
= Price in Europe rose from likely output cut in South Africa, while price in China softened =
The proposal from ESKOM, a parastatal power company in South Africa, to buy back power allocated to ferrochrome smelters in order to urgently cope with the expected power shortage was accepted by, so far, 6 ferrochrome producers out of 8.

As a result of this, large-scale production cut of ferrochrome will inevitably occur during March through May 2012, and the spot price of charge chrome in Europe already rose to US¢115/lb Cr ddp. This situation will serve as an advantage to the sellers in the negotiations scheduled to commence this week. It is currently forecasted therefore that the European benchmark price for the Q2 (April - June) of 2012 will be at least US¢140/lb Cr, compared to US¢115/lb Cr for the Q1 (January - March) 2012.

For reference, the estimated consumption of power by the South African ferrochrome producers was 15 tWh (terawatt-hour), about 6% of the country's total consumption.

Ferrochrome smelting operation in South Africa during the past twelve months has not been attractively profitable, while accepting the ESKOM's proposal and selling back the power is said to bring in about US$1 million per month to some of the producers. There is little wonder that the producers accepted the proposal, when they were not very keen about producing ferrochrome without profit.

Those who reportedly accepted ESKOM's proposal are, Xstrata-Merafe, IFM, ASA Metals, Assmang, Ruukki (Mogale) and Samancor. Estimated volume cut by Xstrata-Merafe, holding nearly 50% of production share in South Africa is said to be 100,000 tons by selling back the power to ESKOM, based on which the impact of ESKOM's power buyback over to the country's ferrochrome output is calculated.

The power rates in South Africa are to be again raised in April 2012 by 25.9% following the substantial rise in April of 2011, and power supply is planned to cut by 16% during the 2012/2013 fiscal year. In addition, winter, the high-power rate season, is coming after the March - May cutback. In wintertime ferrochrome production is curtailed to save costs, extending the period of output cut at least until winter is over, or the higher power rates become normal.

Once ferrochrome production is further cut, consumption of or becomes lower, allowing ore exports from South Africa mostly to China to further rise in order to continue the current operational rates at the mines. In 2011 China imported 4.65 million tons of chrome ore from South Africa, and the quantity is likely to increase in 2012, given the situation in South Africa.

Contrary to what is happening with the price for the ferrochrome in Europe, the price is sliding down a little to RMB7,700 - 7.900/ton in China - a twisted situation between the two big markets.

Considering the a little weak move of the price in China as well as the growing influence by China over the stainless steel industry, non-Chinese stainless steel mills are apparently not fully ready to accept higher benchmark price for the Q2 simply because of the changes in South Africa such as the forecasted short supply and thin inventory.

As to the Japanese mills, besides all of the above, they have a headache of stronger yen currency, forcing them to lose some of the export business. Therefore, they will give utmost priority to profitable operations by minimizing intake of ferrochrome to avoid cost increase and wait for the time when situation becomes better.
last modified : Fri 16 Mar, 2012 [10:24]
Copyright (C) 2004 The TEX Report Ltd. All Rights Reserved.