China: Potential oversupply to weigh on ferro chrome market in 2026

• Strong stainless demand partly offsets oversupply risks
  
  
• Cost pressures weigh on southern producers
  
  

Mysteel Global: After last year's robust performance, China's ferro chrome market is forecast to encounter significant pressure from a potential surplus of supply in 2026, Mysteel's annual report on the ferro alloy suggests.

The report indicates that domestic production of high-carbon ferro chrome is projected to increase further this year and that the lift in output, combined with an anticipated rise in overseas supply, is expected to push total ferro chrome availability to a new high in 2026.

This outlook is underpinned by a substantial pipeline of new capacity additions scheduled for this year, the report says. Mysteel data show approximately 1.2 million tonnes/year of capacity - already constructed, with clear commissioning schedules - is set to come online between now and end-December. These new projects predominantly feature large, fully-closed furnaces, representing high-quality capacity and are mostly located in Inner Mongolia.

For instance, Mysteel's survey results highlight that Inner Mongolia's Xiaolong Metallurgy Co. is scheduled to complete and commission a 180,000 tonnes/year greenfield HC ferro chrome project sometime this year. Furthermore, two companies in Guangxi province plan to repurpose a combined 60,000 t/y of capacity for HC ferro chrome production, targeting commissioning between February and April.

These expansions will further amplify the cost advantages of smelters in North China, which are likely to squeeze out higher-cost producers, particularly in southern regions.

Consequently, despite expectations that domestic stainless steel output will remain high this year ensuring continuing high demand for ferro chrome - a supply surplus in China's ferro chrome market is increasingly likely, given the sheer volume of new and existing operational capacity. In parallel, the potential restart of suspended ferro chrome smelters overseas could also contribute to the supply increase.

In this scenario, the domestic ferro chrome market in 2026 is predicted to strengthen initially before weakening, coming under pressure for much of the year. A silver lining is the ongoing optimization of the supply structure, as the proportion of high-quality ferro chrome capacity continues to increase.

Tight supply bolsters prices in 2025

The report notes that for most of last year, the market was "tightly balanced" or faced a "modest supply gap" which drove prices higher.

Mysteel's assessment showed that by the end of 2025, the price of 55% high-carbon ferro chrome in Inner Mongolia, the key reference price in the domestic FeCr market, had surged to RMB 8,100/t ($1,165/t), 50Cr, ex-works including VAT, up by a significant RMB 1,000/t ($144/t) from the start of the year.

Although domestic HC ferro chrome output remained elevated, a significant reduction in imports from the second quarter intensified the supply deficit. This was triggered by major overseas producers scaling back operations, most notably the complete suspension of Glencore-Merafe's ferro chrome smelting business in South Africa from May, as reported.

China's imports of HC ferro chrome fell to 2.45 million tonnes in 2025, marking a sharp year-on-year decline of 33.2%, according to data released by the General Administration of Customs.

Crucially, robust demand from the stainless steel sector provided fundamental support. Mysteel's latest survey shows that domestic crude stainless production is estimated to have risen 4.5% on year to some 40 million tonnes in 2025, fueling consistent demand for ferro chrome feedstock and underpinning the ferro chrome market's strong performance throughout the year.

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