Cheaper chrome ore costs China's FeCr market price support

China's ferrochrome (FeCr) market is under renewed stress as seaborne chrome ore prices have plunged significantly over the past two weeks, ending nearly two months of stability. The sharp decline in ore prices has not alleviated the losses faced by Chinese FeCr smelters but instead, has added downward pressure on ferroalloy spot prices, particularly as major stainless steelmakers are evaluating market conditions to finalize their raw materials bidding plans for January deliveries.

Mysteel's assessment shows that as of December 11, the CIF price for 40-42% chrome concentrate shipped from South Africa to Tianjin port had dropped sharply to $220/dmt, a decline of $50/dmt in just two weeks. This marks the lowest level since September 2022, a period when FeCr spot prices in China were also at multi-year lows.

In contrast, portside chrome concentrate prices have experienced a more modest decline during the same period. On the same day, Mysteel assessed the price of 40-42% chrome concentrate at Tianjin port at Yuan 50.5/dmtu ($7/dmtu), down by Yuan 5/dmtu month-on-month. The slower decline in portside prices reflects traders' reluctance to lower prices quickly due to their high procurement costs, Mysteel Global reported.

This price disparity has led many FeCr smelters to seek out lower-cost seaborne cargoes, which are currently priced approximately Yuan 11/dmtu lower than portside chrome concentrates, according to a Shanghai-based analyst.

As a result, trading activity for portside ore has slowed, causing stocks at Chinese ports to mount. Mysteel's weekly survey indicated that chrome ore stocks at the Chinese ports it surveys reached 2.69 million tonnes as of December 6, up by 373,000 tonnes from November 8 – a new high since July.

The sluggish portside trading also reflects waning enthusiasm for production among domestic FeCr smelters, whose months of persistent operational losses have caused them to ease back on production. Mysteel's survey of smelters covering 95% of domestic capacity showed that their November FeCr output had fallen for the fourth consecutive month to 720,400 tonnes, down 4.9% month-on-month.

However, the ongoing production cuts may help ease the oversupply in the FeCr market currently, particularly as stainless makers are expected to increase their production further in December.

According to Mysteel's tracking of 43 Chinese stainless producers, total crude stainless steel output last month reached 3.32 million tonnes, up 0.8% month-on-month, while the production in December is forecast to rise further to 3.43 million tonnes, an additional 3.2% increase.

Despite the active production, FeCr smelters remain cautious about future demand. High FeCr stocks at stainless producers and scheduled maintenance stoppages among the mills ahead of the Chinese New Year holiday in late January are clouding their outlook, market insiders told Mysteel Global.

For instance, they estimate that the preliminary maintenance plans from three major Chinese stainless steelmakers last week could reduce the supply of 201-grade stainless steel by 210,000-220,000 tonnes in January.

"Stainless steel mills are unlikely to offer higher FeCr bidding prices (for January), given their razor-thin margins in stainless steel production and the already weak spot prices for FeCr," a smelter official based in North China's Inner Mongolia told Mysteel Global.

As of December 11, Mysteel assessed the spot price of high-carbon FeCr (55% chrome content) in Inner Mongolia at Yuan 7,300/t (50 Cr), the lowest since May 2021 and down by Yuan 600/t month-on-month.

Written by Adele Pan, panqinjie@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com