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The fourth-quarter charge chrome benchmark price has been settled at $1.30/lb, a rollover of the third-quarter price. Stainless steelmakers had said earlier that they would push for a decrease in the fourth-quarter charge chrome price, citing slower demand than anticipated for the third quarter and rejecting producers’ claims that the market would prefer stability in raw materials prices. However, conditions have been improving in the ferrochromium markets in Asia, Europe and the USA over the past few weeks and steelmakers accepted the price rollover before conditions improved further and producers asked for a higher price. South African producers said that a rollover was the lowest price they could accept as they continue to struggle with high production costs and a strong currency. Producers say that at the current price of ferrochromium they can make a profit but are unable to invest in capacity expansions. Stainless steel producers are starting to accept this and acknowledge that if stainless steel production returns to annual growth of 4%-5% supplies of ferrochromium could become a problem. Metal Bulletin Daily, 27 September 2010, p 1; Metal Bulletin Daily, 24 September 2010; SBB Daily Briefing, Stainless Edition, 28 September 2010.
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South African ferrochromium producer International Ferro Metals (IFM) forecasts that demand for stainless steel and ferrochromium will strengthen in the fourth quarter of the year. IFM expects the ferrochromium market to tighten over the next two years due to limited expansion possibilities in South Africa as a result of power shortages. IFM says both its furnaces will be operating at capacity in the fourth quarter “subject to the company being able to utilise its maximum electricity requirements”. The construction of IFM’s electricity co-generation plant is on track to be commissioned in October 2010 and should be in full operation in November. SBB Daily Briefing, Stainless Edition, 29 September 2010.
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Prices and demand for South Africa’s ferro-alloys have improved, but a range of domestic concerns, including energy prices, a strong currency and logistics problems are challenging producers. The state utility, Eskom, has increased power tariffs by 25% in 2010 and will implement the same increase for the next two years. Another concern is the lack of a clear mining policy and the ongoing debate about nationalisation of the industry, both of which have created uncertainty. Ferrochromium is the largest ferro-alloys industry in South Africa, and, after a bad 2009, demand is now expected to increase by 13% year-on-year. However, the country is no longer the lowest-cost producer of ferrochromium. On average, it is about 25% cheaper to produce ferrochromium in Kazakhstan than in South Africa. Other problems are an inadequate transport network, which prevents the industry from exporting greater volumes to feed growing demand, and a workforce that is prone to striking. South Africa is still expected to be the largest exporter of ferrochromium in 2010, with forecasts of 3-3.3 Mt. China, the second-largest producer, is forecast to produce 1.5 Mt and Kazakhstan 1.1. Mt. ICDA data for 2009 showed that South Africa exported 25% of its ferrochromium to Europe, 5% to America and 70% to Asia. The pattern is expected to be similar in 2010. Metal Bulletin Weekly, 27 September 2010, p 24, 26.
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Chinese imports of ferrochromium, chromium ore and concentrate look set to rebound in September backed by higher demand and prices. Chromium ore prices started to increase at the beginning of August, attracting traders and ferrochromium producers back into the market. Kazakhstan is now China’s main source of ferrochromium, while South Africa is the top supplier of chromium ore and concentrate. Metal Bulletin Weekly, 27 September 2010, p 10.
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Balance of ferrochromium supply and demand will tighten in South Africa
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Heinz Pariser told delegates at the 3rd South African Ferro-alloys Conference that the rapid growth in China’s steel industry and the consequent increase in demand for ferrochromium could lead to tighter demand and supply conditions in South Africa. South Africa already produces about half of the world’s ferrochromium and the bulk of it is exported to China. By 2015 China could require up to 11.2 Mt of ferrochromium, with 4.5 Mt coming from South Africa. According to Pariser, increasing South Africa’s capacity to match demand over the next three years looks unlikely due to the lack of new entrants into the ferrochromium industry. Metal Bulletin Daily, 30 September 2010, p 2.
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