Ferro Chrome Prices Hit The Roof, Prospects Brighten

The already high carbon ferro chrome prices for April-June 1997 have been hiked by a further steep 15 per cent by South African suppliers. It is now priced at 48 cents per pound of chromium CIF and expected to rise still higher.

The material is in short supply all over the globe, but capacity can be quickly commissioned to overcome any short supply if there is a sharp rise in world prices. The general feeling, particularly with traders, is that even a price of 60 cent per pound of chromium would have been justified or feasible, but the cautious South Africans have not insisted on a larger increase, although they would have won, if they had. Industry forecasts are that there will be a further increase in contract prices during July-September 1997 and the whole of 1997. But forecasters are not to be relied on as they badly burnt their fingers in 1995. Basically, such forecasts are hazardous and have ruined many producers and traders. Even a giant like Elkem had to stop producing ferro chrome.

 

Samancor, the largest producer of high carbon ferro chrome, has already shifted some furnaces from silico manganese to ferro chrome and many others are likely to do the same in the coming months. The Indian scenario: High carbon ferro chrome prices, which had locally hit a low of Rs 22,000 - 23,000, have now increased to Rs 25,000 - 28,000 per tonne and are likely to go up further.

If the export prices hit 55 cents per pound, many of the local producers will prefer to export their product. With traders talking of 60 cents already, there is likely to be increasing stress on exports. Silico manganese prices are also firming up in the global market from a low of $480 to $490. They have now crossed the $520-mark and is presently priced at $540 a tonne.

India has installed ferro alloys capacity of 1.2 million tonnes. But this is only in name. It has to contend with power cuts ranging from 40-70 per cent in MP, Andhra Pradesh, Karnataka and Kerala, with the effective available capacity being only 800,000 tpy. With manganese alloys having a capacity of 400,000 tpy, ferro silicon about 100,000 tpy, the available capacity for ferro chrome is only around 300,000 tpy. Production of high carbon ferro chrome charge chrome in the boom year of 1995-96 was 310,000 tonnes and exports were around 132,000 tonnes. The year 1996-97, being a lean year, production of high carbon ferro chrome is estimated at around 250,000 tonnes, with exports at 125,000 tonnes.

One had very little hope for 1997-98, but the year has started with promises despite import duties being lowered to 20 per cent and steep increases in power rates in all states. However, many of the exporting units are now able to get power at NTPC rates, which enables them to produce ferro chrome at competitive rates. Also, large exporters like Facor, Ispat and IMFA, including GMR Vasavi, have captive power. The Tatas have captive chrome ore mines, and so does Facor. Therefore, exports of ferro chrome in 1997-98 may cross 150,000 tonnes or even touch 200,000 tonnes.

Chrome ore availability: Chrome ore availability is likely to pose difficulties. Whenever, there is a spurt in global ferro chrome prices, there is a scramble for chrome ore. For Turkish 40-42 per cent chrome ore, the price is stated to be around $120-$125 and for 48 per cent chrome ore it is above $160 per tonne.

Indian chrome ore producers like the Tatas, finding the Indian power rates too high, have made some arrangements for toll conversion of material in China. India, in fact, has been the largest exporter of chrome ore to China during the last five years. Exports in 1997-98 are likely to increase further.

The export policy for chrome ore during 1997-98 has an overall ceiling of 400,000 tonnes; consisting 300,000 tonnes of friable ore with less than 52 per cent chrome, with silica of 4 per cent and 100,000 tonnes of lumpy ore with chrome not exceeding 38 per cent. There is no ceiling on exports of concentrates.

Tatas are the biggest exporters of chrome concentrates in India. They also export ore, mostly to China. OMC has a chrome concentrates plant, which is not working properly. There are plans to put up a second chrome concentrates plant of 100,000 tonnes in the joint sector.

Chrome ore mine disputes: The dispute in chrome ore mines lease is likely to hot up shortly. The Tatas are now out of the dispute, their lease area being slashed drastically, but they have been producing to full capacity, without any hitch.

The other claimants of the lease, namely Facor, Ispat, Jindals and IMFA/ICCL, have been allocated only 50 per cent of what was recommended. The state government has kept back the other 50 per cent for new ferro chrome producers. It has also suggested that the chrome ore mined should be for captive use and not for outside sale.

The four allottees are not likely to accept the 50 per cent allocation and may challenge the state government. With chrome ore prices rising, the issue will definitely hot up.