When the smoke is going down
Let’s look at the latest announcement of 700rmb/mt increase for July of ferrochrome bidding price by biggest stainless producer in China. This is widely regarded as the result of the environmental shutdowns in local ferrochrome industry combined with the demand fueled by the monetary easing measures. Restarted by financial authorities in April by decreasing of the banking reserve requirements and repeated in June. This comes in the background of recent announcement of the European Benchmark settlement for Q3 with just a cosmetic correction to previous quarter and at the level of about 10 usc/lb higher than many market participants might have anticipated.
This time European Benchmark has played a role of a leading indicator for the ferrochrome market. It was rather looking forward at the supply/demand picture than following bidding prices dynamics in China as it was the case for at least the last two years.
This is a change of the game and might be a sign that consolidated South African ferrochrome industry is taking more significant role in the market development. The news comes combined with the other factors in the country industry such as chrome ore export duty discussion, electricity cutback risk reappearance in the news and changes in China domestic production where the main recent topics were environmental production interruptions and closure of non-profitable ferrochrome producers.
There was a time in the early 2000’s when ferrochrome market in China depended on import and was following international trend. After 2008 it was moving in its own direction, not so much correlated with the international one. It was leading the market ex China for the past three years, and now the game is changing again. Hope to see in the second half of the year that it is going to be something new or is it a pendulum swing?