European Ferrochrome Benchmark Settled at $1.15/lb
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Company Announcement - Kindly note that the fourth quarter European HC-Ferrochrome benchmark was settled earlier than expected at $1.15/lb. This is 4c/lb lower than the previous quarter. Whilst this price is lower than we anticipated, we estimated a weaker settlement based on the following factors:
- Cheap prices in Asia are capping prices: Despite the fact that chrome ore stocks in China have declined, relentless smelter expansions, the availability of cheap, local ferrochrome and the surplus of ferrochrome in China is expected to continue to impact negotiating power and place downward pressure on prices.
- Spot prices are more or less at the same level as they were at the end of the previous quarter. Ferrochrome import prices into China during the third week of September have remained depressed at around $0.81-0.94/lb, well below the 3Q14 benchmark price of $1.19/lb, but unchanged from June 2014.
- The weak rand provides a benefit to South African producers, negating the need for price increases.
- Cheap stainless steel is finding its way onto the European market. Despite the impending anti-dumping legislation, we estimate that around half a million tonnes of Chinese and Taiwanese stainless steel will be exported into Europe by the end of the year, undermining European stainless steel prices. This is almost double the amount exported in 2013.
- Eskom have indicated that as they are in summer, buybacks are highly unlikely. Therefore we expect producers will continue without interruption, adding to ferrochrome supply, which is expected will undermine price increases.
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