Once again, the market is hit by a downward direction right before the end of the year. Chinese tender prices have dropped around 16-17% over the last three months. Still that drop is less than what the market experienced in the first half of the year.
What is different? — The overall market conditions. Stainless steel industry is having another growth year, with the estimated production being 48 million tons, a new record. The demand for steel is also improving globally. With the improved conditions in the stainless-steel industry, ferrochrome production is also on the pace for the record global production.
So why are the prices going down?
One could call this drop as overcorrection due to end summer over-recovering due to the previous overcorrection in May following over-recovery in Q1-17/Q4-16 which, in turn, was a result of far more deep than justified drop of the tender price in beginning of the 2016. Thus, it is generally expected that the prices will pick up once again in March as demand in China will start to improve.
Background for the drop can be attributed to the fact that China is planning a major 3-month shutdown of the industrial production around 28 major cities. This leads to a strong believe that demand for stainless steel will decrease in Q1 2018. Also supply of chromium ore to China is sufficient enough to maintain necessary levels of production.
Overall, we believe that the industry does not need this Cr and FeCr volatility as it makes whole industry look unpredictable and speculative which in turn makes long term planning impossible and put at risk future development from both consumer and producer prospective. This is again a confirmation that Cr and FeCr markets require new approaches in pricing system.