Ferrochrome price nears bottom, but no improvement expected just yet – analyst
The ferrochrome market is nearing the bottom of the cycle. This is evidenced by the fact that the latest price contractions have resulted in closures across the supply chain, states mining consultancy Core Consultants MD Lara Smith.
She notes that stainless steel production during the fourth quarter of 2015 declined to 9.5-million tons, compared with 11-million tons in quarter three (Q3) of 2015 and 9.9-million tons in quarter four (Q4) of 2014.
Smith says that China produced 4.9-million tons of stainless steel in Q4 of 2015, slowing from 5.4-million tons in Q3 of 2015.
“Going forward, 2016 is expected to realise lower output (40.5-million tons), compared with 2015 (40.9-million tons) as mills draw down from existing stocks,” she states.
Additionally, Smith points out that a number of countries have instituted antidumping measures against Asian stainless steel exports, including the European Union and India, forcing Chinese producers to scale back production.
Core Consultants estimates that ferrochrome capacity use slowed to 54% in 2015, compared with 60% in 2014. Production has declined to 10.1-million tons, compared with 10.8-million tonnes in 2014.
Smith says, at these levels, the market is in deficit. Despite this, she does not expect any recovery in prices, owing to a number of economic factors, including high stocks of finished stainless steel, slowing demand, particularly in China, and a strong dollar and weak rand, enabling South African producers to lower prices.
Smith highlights that “poor prices” have resulted in a number of shutdowns of ferrochrome operations. South African ferrochrome producers Tata Steel KZN and International Ferro Metals SA remain in business rescue, Turkish producer Yildrim Group has cut production at Tikhvin, in Russia, and Zimasco has shut its furnaces in Kwekwe, Zimbabwe. “It is uncertain when these operations will resume,” she comments.
Smith notes that, during quarter one of 2016, prices settled at 92c/lb and expects that the price will roll over in the second quarter.
“Core Consultants does not expect prices to recover to above $1/lb this year,” she concludes.
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