FeCr Supply Factors Overview November, 2018
1. ESKOM has been in denial about coal cliff
- ESKOM is now running short on the coal stocks at the major powerplants. According to South African news sources and Ferroalloynet.com, some of the plants have around 10 days of stockpiles, while the minimum required is at least 20 days. ESKOM has warned that the possibility of nationwide power outages is increasing.
- This problem continues to undermine governments attempts to attract more foreign investments in the country. Since such uncertainty most likely will push investors in the opposite direction.
- This issue is growing on the weekly basis and continues to create major obstacle for the ferrochrome industry. Without stable supply of electricity, possible power shedding and outages, the industry most likely will continue to shrink at least for a short-term.
- As the result, that might increase production and shipments of chromium ore, since its production is less electricity demanding.
- To be a building block for the economy and the ferrochrome industry ESKOM will need to address the main problems and implement fundamental changes to solve them.
2. High-carbon Ferrochrome capacity release Chinese provinces in November 2018 (source: Ferroalloynet.com)
- Guizhou November output is expected to be around 27,900 tonnes, which represents 34% of the total monthly capacity. The drop from October is around 2%.
- Sichuan November output is expected to be around 33,000 tonnes, which represents 24% of the total monthly capacity. The drop from October is around 17%.
- Hunan November output is expected to be around 13,000 tonnes, which represents 23% of the total monthly capacity. The drop from October is around 17%.
- Northwest Region November output is expected to be around 21,200 tonnes, which represents 25% of the total monthly capacity. The increase from October is around 8%.
- Shanxi November output is expected to be around 36,900 tonnes, which represents 40% of the total monthly capacity. The increase from October is around 2%.
- There is no final output data for total Chinese ferrochrome production for November, but it is likely that the total output will decrease.
- The obvious factors for the production slowdown are decrease in China tender prices for November, which put a lot of meltshops in a disadvantage due to high cost of production and ongoing environmental shutdowns.
- Additionally, the above-mentioned provinces house a considerable amount of small ferrochrome meltshops. There is a chance that after environmental inspections some of them won’t return to the operations.
3. Despite decrease in ferrochrome production in South Africa and China it remains to be seen how the supply/demand balance will be affected. The question marks are the stainless-steel production further direction during slower winter months, environmental shutdowns in China and drop in stainless-steel prices on the background of various trade tensions concerns.
4. In these circumstances there are no good reasons for upward or downward movement for the ferrochrome market, unless one of the above factors starts to outweigh another.