TISCO and Tsingshan just announced their June Tender Prices, the drop of 350 RMB/t (6550 RMB/t and 6746 RMB/t respectively). This moves Tender prices to lowest level since May 2018. The most likely scenario for Q3 European Benchmark now is to return to the level of Q1, but there is a possibility that the drop can be even wider, since Q3 is generally one of the slowest times of the year.

Some factors that attribute to the current downturn in prices:

  • Surplus of ferrochrome on the global market
  • China leads the oversupply, thus driving the demand for imported material down
  • New stimulus package in China has limited effect on the market and demand
  • Risk to supply side didn’t not last long, especially with price improvements in March and April
  • New turn in USA/China trade war, creates uncertainty for stainless steel and ferrochrome producers
  • US steel market is slowing down for first time since 2017
  • EU is also not doing well, especially the automotive industry

On the other hand, there are factors that might help improve the market, both short and long term and also support market in Q3:

  • Most of supply curve is underwater and shutdowns in FeCr are starting in China as well.
  • Following consolidation in RSA, last big deal will leave world ex-China with virtually one producer of ChCr as rest might be diverted to China in the future. To manage these risks consumers might increase the security stocks targets for the ChCr.
  • if restocking will start this will inincrease demand for HC FeCr

The current situation once again shows how dysfunctional market is. Domestic prices in China becoming more and more influential around the globe, but that doesn’t solve the liquidity and no-hedging issues, as well as a lack accounting for supply/demand fundamentals of different parts of the world.

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How big is the fish?
European Benchmark Q3 2019