Same time last year chrome market was in the middle of uncertainty going forward into 2021, 2021 “No Desperado” or “Quizas, Quizas, Quizas” (Part 2), while other commodities such as nickel, copper and iron ore had already returned to price levels last seen 7-8 years ago.

In fact, in 2021 ferrochrome market performed significantly better compared to other commodities.

Below are some major indexes performance since the beginning of the year:

  • LC FeCr USA 131%
  • HC FeCr USA 115%
  • LC FeCr EU 106%
  • Chromium alumino-thermic EU 92%
  • HC FeCr EU 83%
  • China FeCr Bidding Price 64%
  • EU Quarterly Benchmark 54%
  • UG2 Chromium ore 22%

While most of the chrome related products have already reached their peak most likely, UG2 growth was far behind, which might indicate its better relative potential performance in 2022 versus other indexes.

Such increase in prices, which some looked at as a possible pricing bubble, could be attributed to:

  • Global economic recovery, combined with monetary and fiscal measures taken by major financial authorities.
  • Increase in stainless-steel production globally, driven by China and Indonesia:
    • For the first nine months of 2021 stainless steel melt shop production increased by 16.9% year–on–year to 43.0 million metric tons, or 8% increase versus the same period in 2019.
    • Annualized production for 2021 is estimated at 57.3 million tonnes, which is 10% higher than in 2019 and 13% more than in 2020.
  • Closure of production capacity for FeCr ex-China that’s have been taking place over the last decade, has resulted in short squeeze. Power rationing and environmental restrictions in China has further tightened FeCr market, where production is estimated at 14.2 million tonnes for 2021, 7% higher than in 2020, but 3% lower than in 2019.
  • Thus, demand for FeCr in general has been growing at much faster rate than supply. Combined with additional factors such as increase of export tax from China, and introduction of export duty from Russia have added further upward momentum especially for refined ferrochrome and chrome metal, where those countries account for significantly more than 50% of the global market.By the end of the year growth momentum has mostly evaporated, and one can expect some correction going into 2022, while possibility for stabilization or even further growth should not be disregarded, taking into account massive increase of production costs worldwide, taking place due to numerous factors, such as additional need for environmental investments, increase in energy prices and increase in fiscal pressure for miners.Looking forward one can apply method developed to analyze behavior of financial markets. Candle graphs below show historic behavior of EU Benchmark and Bidding Prices in China:

On the left graph representing EU Quarterly Benchmark, one can judge from what happened in 2017-18 years, when price consolidated more or less between 2 moving average lines, 1.2-1.4 USD/lb at that time. Thus, one can consider a drop to 1.6 in 2022 and further consolidation between 1.4-1.6 USD/lb.

Similarly for the Bidding Price, if the price could break the support level of 9000, then consolidate around 7700-9000 (at 6.3819 FX rate, the corresponding USD price is 0.97-1.13 per lb/Cr).

Of course, this analysis cannot be used to forecast the price, however it illustrates where price could consolidate considering statistics of past market’s behaviour. This consideration does not take into account such major factors going forward into 2022:

  • Deceleration of economic recovery around the globe.
  • Tapering of monetary stimulus combined with potential credit and financial market disbalances, and currency volatility in major ferrochrome producing countries.
  • Growing inflation, and possible stagflation scenario.
  • A sharp jump in energy prices.
  • Logistic bottlenecks.
  • Unclear situation with power rationing and environmental restrictions in China going forward.
  • Significant changes of the world trading regulations for example: introduction of Carbon Border Tax mechanism in Europe, possibility of chromium ore export duty in South Africa, rise in export duties on FeCr and FeSi in China and increase of import duties on stainless-steel products from China, Indonesia and etc.

Considering above mentioned issues there is a possibility for further price volatility going into 2022, with market potentially stabilizing at equilibrium level between peak in 2021 and bottom in 2020, to ensure that healthy supply will balance growing demand from steel industry.

Another question is to why historically average premium of the left-hand side graph has been around 40%.

Such gap between two major indexes representing ferrochrome market shows how puzzling the pricing system for ferrochrome is. The weaknesses of the chromium market structure for a considerable time were lack of pricing transparency and inability to react as fast as other more liquid commodities to constantly changing market conditions.

In 2021 UNICHROME was developing SoftMetal, demo version and detailed description can be accessed using the following link. We expect SoftMetal to go Live in H1 2022. It is an exchange-like trading platform which facilitates fair market for multi-element metals, such as ferrochromium, via an auction-exchange mechanism based its own unique concept developed using modern achievement of auction theory and state of the art encryption technology.

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