Start of 2018: “For a few dollars more”
With 2018 being only two weeks old, some positive news seems to come. That will hopefully be a positive sign for the 2018 in the Chrome industry.
There are indeed some positive indications:
- High Carbon ferrochrome spot prices continue to rise in China and Japan. Despite holidays and slow trading, the prices are on the rise, as some traders and stainless-steel companies are preparing to store material for Chinese New Year, according to FerroalloysNet.
- Spot prices for chromium ore in major Chinese ports continue to increase. In December alone, the prices increased by 10%, thus forcing ferrochrome producers to push their prices upwards.
Unichrome’s view on global low carbon FeCr market has not changed despite the correction of the China domestic prices in Q4, while current LC weekly dynamic it is down, which we believe does not reflect the underlying demand\supply picture. Thus, we expect this trend to reverse soon.
January tender prices in China also started an upward movement after two/three months of decrease due to increase in chromium ore, coal price and electrode cost increase.
Low Carbon prices in USA also seem to pick up — due to slowdown of imports from China affected by domestic price increase and export cuts by traditional suppliers due to the long time history of disadvantage in netbacks.
Improvement within China carbon steel industry
According to China’s Ministry of Industry and Technology, despite capacity cuts, China carbon steel industry profits improved by 180%, whilst operating revenues also jumped by 20%.
What is the main reason to that? — In our opinion, the carbon steel industry will be more focused on quality and profit improvements, and, at the same time, cutting overcapacity, including shutting down all loss-making enterprises and merging smaller ones. These measures show that China is quite ready to implement rather radical ways. After resolving the carbon steel industry problems, the Chinese government might potentially turn to solving exactly the same issues within stainless steel industry. Therefore, one can expect that such changes will improve demand for higher quality ferrochrome products.
China HC Ferrochrome update
As we discussed in our end of the year report, we expected China spot prices to grow at the beginning of the year. Judging by the latest news, our expectations were justified.
As reported by Metal Bulletin, the prices are continuing to increase due to increase in power prices (resulted from coal price increase) and continues growth in chromium ore prices. Both issues might lead to decrease in domestic production, thus China will have to rely on imported ferrochrome.