Ferrochrome producers see tough times ahead

Caught between rising input cost and poor demand, ferrochrome manufacturers fear difficult times ahead till at least the end of the second quarter of this financial year.

Many producers, who have either compressed output or are busy negotiating prices, expect prices of the alloy to recover from October onwards, in line with projections for the global economic situation.

“I believe ferrochrome prices will stabilise now and move forward in the third quarter (from October), when the international economy is expected to turn around in a positive direction,” said V K Jodhani, senior general manager, marketing, Balasore Alloys.

Ferrochrome prices move in accordance with the global economic conditions, which give a cue about the demand situation for most commodities, including steel. As a key ingredient for making stainless steel, ferrochrome prices are also guided by international financial situations.

Since stainless steel production is very low in India compared to other large Asian economies, about half of the ferrochrome manufactured in India — the total output is estimated at one million tonnes — finds its way to steel mills in China, South Korea, Japan and Taiwan.

At present, local producers are looking to export high carbon-contained ferrochrome at $1 a pound (lb) after adding increased power rates and other costs, while key buyer China wants to buy the commodity at between 92 and 95 cents a pound, citing shrinking demand for stainless steel.

“China, being a leading producer of stainless steel, commands fixing of ferrochrome prices. The price scenario has been inconsistent for some time and that’s why we are looking for domestic sales,” said Deepak Mohanty, senior commercial officer of Indian Metals and Ferro Alloys.

Of 32 million tonnes of global stainless steel output every year, China accounts for 40 per cent.

Asian stainless steel makers prefer to market their product in Europe, though Europe itself is a large producer of stainless steel, ranking second after China. The debt crisis in the common currency bloc has dampened the demand for steel and other allied products in the region.

According to the World Steel Association (WSA), March crude production growth remained steady at 1.9 per cent year-on-year, the same as seen in February worldwide. While steel output rose in Asia during the January-March quarter by 1.5 per cent to 242 million tonnes, production declined by about four per cent in Europe, the data showed.