Bolivar cannot carry double
Over the month of October, the ferrochrome industry was puzzled by disaccord in bidding prices and terms from major consumers in China.
- TISCO was the first to announce their bidding price for October with a sharp increase of 400RMB and changing the term of validity from one month to a quarter. This could be a good step towards more stability and transparency for the market.
- Yet neither Baosteel, nor Tsinghsan have followed this move and they only announced their prices for the month of October and neither of them in line with TISCO, nor between each other with 200 and 100 RMB increase respectively. This made it the first time in recent history that those two prices were lower than TISCO’s price, which was usually 150-200 RMB lower due to its logistic cost advantage to domestic ferrochrome producers in the Shangxi region.
- We expected this Bidding Price increase to happen in September, but the stainless-steel mills in China either rolled the prices over or increased it marginally.
- This has been followed by November Bidding Price adjustment in which Baosteel fell in line with TSS (a decrease by 100 RMB/t), while the difference between TISCO and seaborne consumers persists and even slightly increased.
- December will show where the quarter will end for seaborn consumers and what adjustment TISCO will apply for Jan 2020. It will also be a good basis to compare with EU Benchmark move for Q1 2020.
- Despite continuing swings in the Bidding Price, the USD denominated price remained stable, due to ongoing volatility of the yuan. We estimated the average Bidding Price for October and November to be around 0.73 USD/lb.
- Decrease in the November Bidding Price comes as a surprise considering recent stainless-steel news from China. According to data from Special Steel Enterprises Association of China the stainless-steel production in the first nine months of 2019 stood at 22.49 million tonnes. That’s an increase of 10.5% year on year, while consumption increased by 11.64% to 18.53 million tonnes.
- The European Benchmark for the 4th quarter has been announced at 1.02 USD/lb, down only 2 cents from the previous quarter. We see it as an indicator that 4th quarter price for ferrochrome ex-China will recover and the current oversupply should dwindle by the end of the year.
- Despite some improvements in ferrochrome prices around the globe, ex-China production continues to fall, with MERAFE recently announcing 29% drop in production for the latest quarter.
- With the recent ruling by the WTO, United States announced duties on European goods worth around USD 7.5 billion. So far ferroalloys are not included in the list of those goods, but due to carousel option, it remains a possibility in the future.
Today major ferrochrome industry participants gather for ICDA’s 35th anniversary meeting in New Delhi, India. We do hope that this meeting will aid the industry in moving smoothly and sustainably towards a brighter future.
Here are some interesting topics Unichrome recently discussed with Fastmarkets.
We will definitely have even more things to discuss and news to share during the upcoming International Ferroalloys Conference in Budapest on November 17th–19th 2019.