Ferro Chrome Prices Pared Amid Uncertainty

There has been much confusion in the contract prices of charge chrome/ ferro chrome for the July-September 1998 quarter.

There were reports that the Japanese have lowered the prices by one to 1.5 cents per lb compared with the rates for the previous quarter. The new price ranged from 45 to 46.5 cents per lb of chromium. The South Africans had agreed for the same.

But, when negotiations with the Europeans began, it was given out that a final price had not been arrived at and efforts were on to roll over the prices at the levels of the previous quarter. This was resisted by the European consumers. Now it is settled that the prices would be reduced by one to 1.5 cents for the third quarter of 1998.

 

Charge chrome prices are determined by the South Africans where there is increasing concentration of capacity. Two producers _ Samancor and the trader-cum-producer Glencore _ have a capacity of 2.2 million tonnes and these determine the world price.

But the state of the stainless steel industry is very bad in Japan and South East Asia and raw material suppliers cannot be blind to it. Further the spot price of charge chrome and ferro chrome is lower at around 42 to 43 cents per lb and it can satisfy a substantial part of the world demand. So the dominant suppliers had to yield to the demand of the consumers for a price cut.

The cost of production for the South African producers varies between 24 to 30 cents per lb and the shipping costs are 8 to 10 cents a lb. So, even at the present low prices, they are earning a profit and are keeping out most of the competing suppliers, particularly from China.

Despite low world prices, India has been a large exporter of ferro chrome during the last few years. This is because the producer exporters have their own captive power plants or captive sources of ore or both.

According to preliminary estimates, production of charge chrome ferro chrome in 1997-98 was around 296,000 tonnes against 234,000 tonnes in 1996-97. Exports also spurted to around 172,000 tonnes in 1997-98 against 148,000 tonnes in 1996-97.

Imports of high carbon ferro chrome have also been increasing and they were around 15,000 tonnes in 1997-98.

The outlook for 1998-99 is not rosy but exports from India may not fall because the producer exporters have a limited market in the country. Major exporters are Tisco, Facor and ICCL of which the last two are sick companies. What impact this would have on exports remains to be seen, but curtailing exports may be a remedy worse than the disease.

Meanwhile, MMTC has rolled over the export prices of chrome ore for the July-September quarter. The prices were reduced in January 1998 to encourage exports but there has been no appreciable increase in offtake.

These reduced prices were $111 for 50/52 Cr2o3 material, $106 for 48/50 and $95 for 44/46 material per tonne FOB.

These prices were kept unchanged in April 1998 and now they have been left at the same levels once again. Exports of chrome ore are said to be very poor, at around 15 ,000 tonnes for the quarter April June 1998.

Since there are no buyers, MMTC and the exporters felt there was no point in reducing prices further. If, however, buyers emerge at lower prices, MMTC will have no problem in matching the prices.

The quota for chrome ore exports for 1998-99 is 300,000 tonnes and most of the exports go to China. But owing to low prices, China is no longer a buyer and the exports of chrome ore may not touch the ceiling limit.