15 Apr 2010 07:29

Guest column: Ferrochrome price looks set to rise in April

By Zhang Qiqin In this week's Interfax guest column, Zhang Qiqin, an analyst with Uc361, discusses how the price of ferrochrome is set to rise in April and the second quarter of 2010. Translated from the original Chinese by Xu Hong.Shanghai. April 14. INTERFAX-CHINA - The price of ferrochrome on the Chinese market increased significantly in March. In the case of high-carbon ferrochrome, its price on the domestic market increased from RMB 8,450 ($1237.90) per metric ton at the beginning of March to RMB 8,900 ($1303.82) per metric ton by the end of the month, an increase of 5.3 percent. This is completely different from last year's situation, when, due to a combination of the global economic downturn and very low-priced ferrochrome, the price of high-carbon ferrochrome dropped in February - and kept on dropping. By the end of March 2009, the price of high-carbon ferrochrome was a mere RMB 6,050 ($886.30) per metric ton.

There are three major factors currently influencing the price of ferrochrome on the Chinese market. First, the global stainless steel market in a number of European countries and the United States is recovering, bringing about a strong demand for ferrochrome once more. At the same time, due to a 40 percent increase in power tariffs, steel mills in South Africa and India have accordingly raised their ferrochrome ex-work prices. As a result, Chinese stainless steel producers have cut their imports. These two elements have both led to greatly reduced ferrochrome supplies on the Chinese market.

The second influencing factor is the increase in stainless steel output on the Chinese market, which has pushed up market demand for the raw materials. In my estimation, China's stainless steel output could hit 2.77 million tons for the first quarter of 2010 - a new all-time high.

And lastly, the spot chrome concentrate price on both the Chinese and international market has increased drastically. In order to ensure profit margins, ferrochrome producers therefore need to raise the price of their products.

China's ferrochrome supplies are, at present, fairly tight. The majority of stainless steel producers are simultaneously buying up raw material, while the dry weather in some ferrochrome producing regions has also had an effect on supply. Most steel mills subsequently raised their high-carbon ferrochrome sales prices (including freight rates and tax) in April, among them Baosteel, Taiyuan Iron and Steel (Group) Co. Ltd. (TISCO) and Jiuquan Iron and Steel (Group), all of which have pushed their high-carbon ferrochrome sales price (including freight rates and tax) up to RMB 8,800 ($1289.17) per metric ton.

In February, China imported a total of 181,000 tons of ferrochrome, down 3.2 percent month-on-month. This is mainly due to the fact that the ferrochrome price on the international market is much higher than that on the Chinese market. International ferrochrome producers are also much more willing to sell their products to European and American consumers at a higher price, due to these countries' recovering steel industries. This is a continuing trend, and I predict that China's ferrochrome imports will remain at their current level in April.

China's chrome concentrate imports stood at 585,000 tons in February 2010, down 7.5 percent month-on-month but up 193 percent year-on-year. The decrease in chrome concentrate imports in February comes as a result of its fairly tepid price on the Chinese market, which caused traders to be less than enthusiastic about importing. The Chinese New Year holidays also had a part to play, as most businesses suspended operation for the holiday period.

According to some estimates, the price of nickel on the international market will maintain its upward trend, giving support to the price of stainless steel. Moreover, stainless steel output is expected to continue to go up in 2010. Therefore I believe the price of ferrochrome will also continue to increase throughout the second quarter of 2010.

The above is a personal opinion piece by the author. Its publication in no way implies that Interfax shares the views expressed in the article.