China: Ferro chrome output hits record high in May

• Strong stainless demand lifts ferro chrome output
  
  
• Power cost relief encourages production ramp-up
  
  

Mysteel Global: China's production of high-carbon ferro chrome (HC FeCr) surged to a record high in May, a consequence of lower electricity costs that smelters enjoyed in the rainy season in southern China and sustained strong demand from the stainless steel sector.

Domestic HC ferro chrome output reached 901,900 tonnes (t) last month, up by 38,500 t or 4.5% from April and soaring 23.9% from the same month last year, according to Mysteel's latest survey of domestic ferro chrome smelters, which represent over 95% of total domestic capacity. Over the January-May period, total HC ferro chrome output stood at 4.39 million tonnes (mnt), a sharp 35.5% increase y-o-y.

The onset of the rainy season in south China has filled hydroelectric dams in the region and prompted utilities firms to lower their electricity tariffs. The lower power costs encouraged some smelters in the region to resume or ramp up production, Mysteel Global learned.

Key traditional smelting hubs -- including Inner Mongolia in North China, Ningxia in Northwest China, and Sichuan in South China -- maintained stable production, the survey findings show.

In the northern regions, where thermal power is the primary energy source, the average operating rate at ferro chrome smelters stayed above 80%, with major smelters sustaining high production schedules, the data also indicate.

Meanwhile, China's leading stainless steel producers raised their HC ferro chrome procurement prices for May, another factor that encouraged ferro chrome smelters to maintain high operating rates.

Taiyuan Iron and Steel Co. (TISCO), one of the country's largest stainless steelmakers, raised its May long-term contract price for HC ferro chrome to RMB 8,295/t ($1,225/t, 50% Cr basis), including tax and delivery, cash payment. This was RMB 100/t ($15/t) higher than the previous month.

Similarly, Tsingshan Group, China's largest stainless producer, set its May long-term contract procurement price at RMB 8,495/t ($1,255/t, 50% Cr basis) on the same basis, also up RMB 100/t ($15/t) from April, Mysteel Global learned.

In parallel, feed demand from stainless steel mills remained robust last month as they stepped up production, further prompting ferro chrome smelters to produce aggressively.

Crude stainless output from the 43 Chinese mills under Mysteel's regular tracking totalled 3.82 mnt last month, up 1.9% m-o-m and 10.2% y-o-y, Mysteel's data showed.

At their current ferro chrome smelting profit levels, smelters show little willingness to cut production proactively, according to sources. Combined with ample feedstock chrome ore supply in the near term, the overall loose supply pattern for HC ferro chrome is unlikely to change significantly in the weeks ahead, Mysteel Global noted.

Mysteel's latest assessments suggest that by 10 June, the average profit margin for smelters in Inner Mongolia producing high-carbon ferro chrome using the semi-closed submerged arc furnace-electric furnace route stood at 4.9%.

However, the current power supply constraints in Inner Mongolia may weigh on output this month, a Mysteel analyst said. Some local smelters are expected to report a slight decline in production, which could provide some support to ferro chrome prices, she added.

On 10 June, Mysteel assessed the price of 55% high-carbon ferro chrome in Inner Mongolia at RMB 8,275/t (50Cr basis), ex-works including VAT, down RMB 175/t ($26/t) from a month earlier.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.