Stainless steel market weighs on FeCr demand

Prices for ferro-chrome across all regions have fallen to their lowest for at least two years on a drop in demand owing to declining stainless steel production.

Global stainless steel production was down by 2.5pc year on year to 12.46mn t in the first quarter of 2019, from 12.78mn t in the first quarter of 2018, the International Stainless Steel Federation said.

Production in China fell by 1.5pc as demand for stainless steel from goods manufacturers hit by the US-China trade war fell. US production was down by 2pc and Asian production excluding South Korea fell by 5.7pc. In Europe, production fell by 5.7pc on the year.

Global ferro-chrome prices have fallen since the first quarter, indicating stainless steel production is still in decline. Prices for 60pc high-carbon ferro-chrome in India fell to an almost three-year low at 62,000-63,000 rupees/t in the latest assessment on 16 July. In China, 50pc grade high-carbon ferro-chrome has fallen to its lowest point since June 2017, assessed at 6,000-6,350 yuan/t on 16 July.

European high-carbon prices are at a two-and-a-half-year low at 80-86¢/lb and the European charge chrome quarterly benchmark price fell to $1.04/lb, its lowest point since the third quarter of 2016.

Oversupply, low demand weighs on prices in Europe

Demand for ferro-chrome in Europe has fallen this year because of a crisis in European steel production. Imports of finished steel to Europe in 2018 rose by 13pc and imports of stainless steel were up by 9.5pc, putting pressure on European producers, European steel association Eurofer said.

The European Commission in February introduced safeguards in the form of tariffs and quotas, but Eurofer dismisses these as ineffective. Since then, a number of steel mills in Europe have closed or reduced output, including some at Europe's largest steelmaker ArcelorMittal.

As well as import pressure, prices for European carbon emissions allowances have reached their highest since April 2006, at €28.43/t CO2.

Steelmaking is a highly carbon-intensive process and the high price has put pressure on steelmakers in Europe.

Despite the pressure on the steel industry, imports of ferro-chrome to Europe have increased in recent months, creating oversupply. In the six months preceding April 2019, Europe imported an average of 72,444 t/month. Imports were up at 92,937t in April. Many consumers will buy material in May and June to cover the seasonal low period in the third quarter, but traders reported buying smaller volumes this year and there are still stocks available in the market.

Imports have fallen since April and Europe imported just 23,818t of ferro-chrome in May, which suggests that oversupply could come to an end after the summer and prices could begin to rise. But if the steel market continues to decline, demand and import volumes for ferro-chrome could remain in Europe.