By the end of 2020, ferrochrome market is starting to pick up slowly from the multi-year lows. We expected this improvement to start earlier, but slow economic recovery ex-China, also dragged down stainless-steel production and demand (around 3% growth in China vs 13% drop elsewhere according to SMR).

As the result ferrochrome prices after slight uptick in March-June, have slightly moved down in Q3 2020. Still by Q4 2020, demand from automotive and consumer goods industries, combined with de-stocking in stainless steel mills, and steep rise in the price of Nickel led to FeCr price resurgent in Europe and USA (8% and 3% respectively), as well as healthy consumption growth in China. As the result European Quarterly Benchmark increased to 1.17 USD per lb/Cr in increase of 3.1% from the previous quarter, with increase year on year being significantly higher, at 15.84% (1.01 vs 1.17). on the other hand, Biding Prices in China decreased by 6% year on year in RMB denomination, while due to Yuan strengthening vs USD in 2020, price in US cents remained unchanged.

FeCr prices are still lagging commodities such as iron ore (price at 7 year high), Nickel (the price level from over a year ago) and Copper (price at 8 year high). Even though both Nickel and FeCr are main ingredients in stainless-steel production, Nickel pricing is more transparent and is able to react faster to market changes, while FeCr pricing mechanism remains old-fashioned and lacks adequacy to market supply/demand reality.

The looming South Africa export tax on chromium ore and continues increase in FeCr capacity/production in China (capacity increase by almost 600,000 t/y in 2020, reaching 12,272 million tonnes), which relies heavily on the chrome ore imports, of which South Africa accounts for almost 80% creates an upward pressure on the supply side.

After decreasing its FeCr Bidding Price by 100RMB/t last week, the second largest stainless-steel producer in the world from Taiyuan, China have revised it this week, up by 200RMB/t to 5800RMB/t, simultaneously extending the acceptance period till the end of February 2021, one could consider this move as a sign of anticipation of the start of moderate market recovery in the near-term.

Last time such move has occurred few years ago and was followed by further substantial market improvement and this time it could also mark a change in the trend and increase upward supply pressure for Bidding Prices in 2021

At the same time uncertainty over COVID situation still persists and ability of major supply: South Africa, Kazakhstan, India, Turkey; and demand regions such as: China, EU, Japan, USA to protect themselves from the negative economic effect of this pandemic would have a major effect on the FeCr market balance.

Hopefully, economic and stainless-steel market recovery will continue well into 2021, while ferrochrome market is on its way to develop a liquid marketplace which will adequately reflect supply/demand balance, measure its participants’ expectations and help to mitigate risks.

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