The latest Tender Prices from major stainless-steel mills in China have been announced:

  • Tsingshan’s Bidding Price for August stands at 5,997 RMB/t, which corresponds to 69.24 US cents/lb (at 6.9536 exchange rate)
  • Baosteel’s Bidding Price for August stands at 6,000 RMB/t, which corresponds to 69.27 US cents/lb (at 6.9536 exchange rate)
  • TISCO’s price has not been announced yet, but its unlikely that the decrease will be higher

Tender Prices returned to the level of December 2019.

The month on month drop stands at 5% for RMB price (while US denominated price decreased by 3%), which is lower than UG2 USD price 17% price drop for the corresponding period, and smaller than previously anticipated 500-600 RMB/t drop. While benchmark was rolled over in Q3, thus May and August price is the same, Tender Price in China in August is 3% higher than in May.

The discord between anticipated drop and the actual price announcements could be attributed to certain factors:

  • 2020 HC FeCr production in China from Jan-July is 3.14 million tonnes, a year-on-year decrease of 8.48% (the output from Jan-July 2019 was 3.43 million tonnes).
  • Imports of HC FeCr decreased from 1.60 million tonnes Jan-June 2019, to 1.52 million tonnes in Jan-June 2020 (a decrease of 5%)
  • Stainless-steel production deceased by only 2% for Jan-June timeframe, while supply of FeCr has decreased by 7.5%, thus 5.5% deficit was supposedly covered from stocks
  • The latest disruptions in supply chain from South Africa and India, raised a concern for material availability, especially while both countries are still trying to return production to pre lockdown levels
  • In case of South Africa, latest rounds of production cuts, business reviews by major player and ongoing electricity tariffs increases, could further decrease availability of seaborne material

With ongoing infrastructure projects in China, demand for stainless-steel should remain firm, still lack of ferrochrome and chromium ore production increase capacity ex-China combined with possibility of further supply chain disruptions could lead to material shortage.

FeCr and nickel are two main elements which are sued to make steel stainless, while FeCr is much more underappreciated than nickel.

  • FeCr spot price Europe March vs August 2020 a drop of 2%
  • Nickel LME price March vs August 2020 an increase of 21%

Nickel has started to recover steadily from low point of 2019/2020. FeCr on the other hand has been trying to recover from the lowest price level in over a decade, but so far has been unable to start a steady improvement process. Nickel price is supported by consequent anticipation of sparking demand from EV industry.

This can be also attributed to the difference in liquidity for both metals:

  • Nickel pricing is very transparent, and nickel could also be hedged on the market. This allows for faster price discovery and attracts investors into nickel market.
  • FeCr pricing remains old-fashioned and lacks adequacy to market supply/demand reality. Thus, it is not extremely attractive for investors and requires a new pricing mechanism. With the current digital technology, it is possible to create trading platform that will provide marketplace with liquid trading with financial responsibility and price discovery transparency.

We believe that such mechanism will soon be created, while before is happens, short-term price, established by the current mechanism will have to increase significantly in order to insure sustainability of FeCr supply for stainless-steel industry.

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