China's ferro chrome output hits 5-month high in April on rising bids
...

- Apr volumes up 15% m-o-m but demand doubt remains
- Higher prices re-ignite production activity of smelters
Mysteel Global: China's output of high-carbon ferro chrome surged by 15.3% m-o-m to 698,200 tonnes (t) in April, hitting a five-month high, according to Mysteel's latest survey that covers 95% of domestic capacity.
The increase was largely driven by rising bids from major stainless steel producers, which bolstered market sentiment and revived the production enthusiasm of smelters. However, concerns are emerging that the sharp rise in ferro chrome supply could outpace growth in demand, potentially weakening market fundamentals once again.
Domestic ferro chrome producers have ramped up operations after top stainless steelmakers tabled higher procurement prices for deliveries during these past two months. On 29 April, Taiyuan Iron and Steel Corporation (TISCO), a wholly-owned subsidiary of China Baowu Steel Group in Shanxi province, raised its bidding price for high carbon ferro chrome to RMB 7,895/t ($1,095/t) including logistics and tax for May delivery, higher by RMB 500/t ($69/t) from the previous month. This followed the RMB 600/t ($83/t) increase in its bid price for April delivery.
TISCO's move aligned with a similar price hike announced on 31 March by Tsingshan Group, the country's largest stainless steel producer. Actual transactions reportedly settled at RMB 8,095/t($1,123/t), including delivery and tax. Tsingshan's bids are typically higher than TISCO's as the group's mills in Yangjiang and Fuan in South China's Fujian province are located farther from ferro chrome smelting hubs in north China's Inner Mongolia, resulting in higher logistics costs.
The upward trend in bidding prices helped ease smelters' losses last month, rei-gniting production activity. Yet, as ferro chrome output climbs, concerns have shifted to the demand side, particularly due to the pronounced decline in production of austenitic-grade stainless steel, the primary consumer of HiC ferro chrome.
Mysteel's survey of 43 domestic stainless steelmakers showed that in April, austenitic stainless output fell by 77,500 t or 4.08% from March to 1.82 million tonnes. The volume is forecast to drop further to 1.78 mnt in May, down another 2.65% from April, if projections hold.
With smelters maintaining high run rates despite weakening demand, the supply-demand gap for ferro chrome is narrowing. Mysteel estimates the supply shortfall in May may shrink to just 6,500 t, compared to a deficit of 106,800 t in April.
"Ferro chrome smelters are unlikely to slow production this month, despite signs of softening demand," commented an analyst based in Wuxi, noting that falling portside chrome ore prices have slightly improved the cost dynamics for producers.
On 15 May, Mysteel assessed the Tianjin Port price of 40-42% grade chrome concentrate at RMB 61.5/dmtu, down RMB 0.5/dmtu from the previous month. The marginal price drop was attributed to rising portside inventories, prompting traders to accept slightly lower offers.
Mysteel's port inventory survey indicated that chrome ore stocks at major ports, including Shanghai and Tianjin, had climbed to 3.15 mnt as of 9 May, up 9% from 11 April.
In short, the mismatch between rising supply and potentially weakening downstream demand could place renewed pressure on the ferro chrome market in the months ahead, prompting producers and traders alike to keep a close eye on stainless steel output trends and raw material inventories, market watchers suggest.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.