Mid Q3 Market view: Never say never. Could H2 2017 dynamics of Cr-contained ore and alloys become a “déjà vu” of 2016?

This is to follow up the previous view regarding the market development in the first half of 2017 made in the end of June.

It is worth to stress out that the main conclusion was that the price fall in China in May – June 2017 was overdone, looked artificial and should rebound by Q4 latest.

Now this has become almost evident. The actual demand in China was not actually down — starting May, import volumes of the ore to China were on the high level. And from the other hand FeCr price was driven to the level below the edge of sustainability for the most of the production in China, unless the ore in turn would go below the reasonable cost justified number as well. This scenario has not materialized due to the straightforward reasons of the costs support.

The demand continues to keep the high level and the prices for Cr ore have moved up from the bottom reached in June, despite the stocks, which continue growing slowly to the level of 2.5mln mt- reasonable number of appr. two month consumption. This is again a prove of the fact that the extend of the price fall in May was way more deep then the stock level would justify, as many believed.

FeCr prices in China have started moving up in July and again accelerating in August and this justifies the view that one could naturally expect another sharp increase in the price as soon as the summer slowdown will be over and, consequently, Cr contained raw material supply security reasons will be recognized as a main trigger.

Again, as this happened one year ago.

And the quicker prices in China will be adjusted higher to the reasonable level, the more likely that it will stay stable in a comfort zone to ensure supply/demand balance in a long term. The later this happen the more up it will go.

Above revision of the situation in China happens on the background of other consuming regions including EU and Japan continue to show growth numbers have not seen for a long and general view by many analytical agencies on the steel industry keep improving continuously.

From the other hand there is no sign that the Cr industry is going to expand for the extend which may be required in order to support consumption growth.