Is the glass half full or half empty? Overview of ferrochrome supply/demand trends Q1 2025
The first quarter of 2025 has been an interesting one for the ferroalloys industry.
At first in January, FeCr Bidding price in China dropped another 400 RMB/t, to the lowest level since January 2021. In February for the first time in six months, major stainless-steel producers have not reduced the price for FeCr but rather rolled it over, which continued in the month of March.
Right before the National Holidays in China, spot prices for FeCr started to pick up, driven by increase in the price of chromium ore. As the result currently the difference between bidding prices and production cost in China for HC FeCr stands at around 800-900 RMB/t, supported by production cost increase caused by the Chromium ore price recent growth.
That could lead to further FeCr production cuts in China, as the current cost for the majority of ferrochrome producers is above recent price levels.
In the beginning of February, the World Stainless Association published production data for Q3 2024, showing that stainless-steel melt shop production has increased by 5.4% year-on-year to 46 million metric tons.
In the annualized terms that brings expected production to 61.456 million tonnes. That is a 5.15% increase over 2023, and the largest tonnage of stainless steel ever produced.
From the table below, one can see that all reporting regions are showing positive production increase in 2024 vs 2023.
While in our opinion data for Q4 2024 could show a slowdown in production growth, we still expect annual production to be above 60 million tonnes.
Despite this data showing that there is a demand for FeCr, prices for chrome related products were on the downside for a while. The main reason is the growth of HC FeCr production significantly outpaced the stainless steel, as indicated in the table below.
While stainless-steel production in China is growing around 4% annually, its FeCr production is on pace for 22% growth YoY. This was closely matched by growth in CIS/Middle East at 21%, and tremendous increase of 60% for Rest of Asia&Americas region. We believe that domestic FeCr production in Indonesia is one of the main drivers for that region.
This disproportion is one of the reasons why by the end of the year ferrochrome producers in China started to cut FeCr production. According to the latest information these cuts range from 120,600 to 142,600 tonnes of monthly production or around 1.447 to 1.711 million tonnes annually. That represents almost 20% of total FeCr output for 2024.
In addition, two major FeCr producers in South Africa also announced plans to decrease output in 2025, possibly as soon as May. With the possibility that one of them idles almost 2/3 of remaining production, a question arises as to which FeCr producing country can replace this material on the market, if any?
In addition to the slowdown in demand for ferroalloys, the global economy now must prepare for some additional risks that could impact demand for ferroalloys even further:
- New wave of tariffs between United States and RoW has started and it’s very hard to predict which categories of goods or countries will those tariffs target.
- CBAM implementation is coming closer, yet it is still not entirely clear for the industry how this system will work and what will be the consequences of its start.
- What additional stimulus measures will be undertaken by China to help in recovery of the property market and increase demand for steel related products, thus improving demand for ferroalloys?
- Will there be similar stimulus measures implemented in the EU or USA?
- Ferroalloys Safeguard measures and what their impact will be on supply/demand for ferroalloys in Europe?
- With diminishing supply of ferrochrome ex-China, could we see new greenfield projects, or volatility and unpredictability of the market will sway the investors away?
- How soon modern and transparent price discovery methods become accepted by the ferroalloys industry?
We see that the ferrochrome market is undergoing fundamental changes. Two largest FeCr producing countries are decreasing production at a high rate. While there is no data for 2025 for stainless-steel production, we expect it to be around levels of 2023-2024. In this scenario, we believe that in mid-term FeCr market can experience undersupply, which should help in price improvements. Will this price improvement be enough to restart some of the idled FeCr capacity around the globe, is another question.