After record breaking price surge for major commodities in 2021/early 2022, second half of 2022 became a “price correction” period. Major commodities (copper, aluminum, zinc, tin, lead) either returned to price level of beginning of 2021 (pre surge), or dropped significantly (nickel) to more reasonable levels.
A year ago, we discussed that all chrome related products showed significant price increase in 2021, with only UG2 chromium ore lagging. Comparing those prices on the yearly basis (December 2021 vs December 2022), the results change considerably as one can see from the table below.
This time UG2 became the second-best performing chrome related commodity in 2022, in line with our expectations from the end of 2021.
One more record was shown by ferrochrome market divergence. The market experienced historically unprecedented disproportions between:
- Grades usually close in their values and semi-fungible in their usage: the price of refined FeCr in EU/USA was twice the price in China.
- Grades within one single region, HG HC (higher Cr, lower Si) is twice than that of LG HC (lower Cr, higher content of impurities) within EU/USA
- Both regions and grades, HG HC price in EU/USA is higher than refined FeCr price in China.
As for 2023, there are lingering questions that ferrochrome market will have to face:
- Slowdown in economy, coupled with inflation
- Volatility of energy prices
- How CO2 emission control measures will impact metal industry
- China: stimulus packages and recovery
- Force majeure bottlenecks in major ferrochrome exporting and importing countries
- Increase of export of refined FeCr from China, Y-o-Y growth of almost 200%
- Supply/demand of ferrochrome balance-current annualized production is around 5% higher than in 2021, while stainless-steel production drop estimated at over 4% compared to 2021
Now let’s imagine what can happen with FeCr market in 2023, while not very probable, but still not impossible:
- Discontinuation of European Quarterly Benchmark
- Formation of new index price discovery tools for chromium
- Creation of a new marketplace, with verifiable, and liquid trading, solving problems of high market divergence, hedging market unpredictability, and managing complex inputs of electricity costs and CO2 emissions
- Groundbreaking research moves Chromium into leading role in “Green Economy”, thus spurring demand multiple times
- Innovation investments rushing into chrome industry, creating “New Chrome World”