This quarter once has again shown that the market is under the shadow of uncertainty of where the demand from China will go
The EU Benchmark for Q4 jumped 26% from Q3, following China tender prices strong behavior during Q3, while in China itself tender has changed the trend down both in October and November. The drop so far was 600 RMB (around 7 USC/lb, less than 35% of only September tender increase), and the December tenders will show if those drops were to balance the market and prices, or it is a start of the downward trend supported by the demand fundamentals.
On the other hand, quite strong performance of the industry form USA, EU and Japan economies showing best performance for more than 6 years, a steep drop in Q1 Benchmark is not anticipated.
The current chrome ore stocks being on the level of around 7 weeks, which are higher than the minimum seen year ago but still much lower than historical average. This again shows that demand for the ferrochrome in China is searching for direction.
Over the last couple of months new issues within the Ferrochrome industry started to pop up:
China tightening ecological norms and control:
- The continuous tightening of the environmental controls in China so far has not affected FeCr industry on the large scale;
- However, there is a strong possibility that in the near future China will have to close older ferrochrome smelters and steel factories, that would obviously have an effect on the demand for FeCr;
- These controls also will have an implication on the use of scrap, which in turn will decrease the demand for FeCr.
Mining rules in RSA:
- With the court date set in December, the mining industry is hoping for a negotiation that will satisfy both sides;
- Yet, with a possibility of the new law being passed, that will further hurt South African industry, because future investors will be more cautions in investing in the country where they might not have enough power to make decisions.
LCFeCr anti-dumping probe in EU:
- So far, the case has been put on hold, due to other anti-dumping issues between China and EU currently taking place;
- With the increase in prices for refined FeCr in China, we believe that this situation will resolve itself, due to decrease in future imports into EU
Graphite electrode shortage and surcharge
No doubt, new development for the industry as stainless-steel mills is adding additional surcharge due to increase in cost of production.
- The main issue is shortage of graphite electrodes and the fact that China supplies around 80% of total production;
- On one hand, it shows that production is increasing and thus improvement in demand, but on the opposite side, increase in the prices for electrodes will become unsustainable for some of producers, thus resulting in production cuts;
- This development once again proves that in order to have a stable industry it is vital to have a secure supply of raw materials, otherwise the disbalance and volatility will continue.
The above-mentioned issues show that now ferrochrome industry moved from simple supply/demand industry to an industry surrounded by political risks on the global scale.