2020-2021 Ferrochrome Price Trend Analysis and New Demand Growth Outlook

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Ferrochrome is a ferroalloy composed of chromium and iron. It is an important alloy additive for steelmaking. According to the level of carbon content in the alloy, it can be divided into high-carbon ferrochrome (4-8% carbon), medium-carbon ferrochrome (0.5-4% carbon), and low-carbon ferrochrome (0.15~0.50% carbon), micro-carbon ferrochrome (carbon content of 0.06%), ultra-fine carbon ferrochrome (carbon content of less than 0.03%). The chromite used for smelting ferrochrome generally requires the content of Cr2O3 to be between 40% and 50%, and the ratio of chromium to iron is greater than 2.8. In recent years, the mass production of 50% chromium “charge grade ferrochrome” is made of ore containing Cr2O3 and low chromium to iron ratio.

Smelting of high carbon ferrochrome
Smelting of high carbon ferrochrome

Application Areas of Ferro Chrome

As an additive to steel, ferrochrome alloy can produce a variety of high-strength, corrosion-resistant, wear-resistant, high-temperature, and oxidation-resistant special steels, such as stainless steel, acid-resistant steel, heat-resistant steel, ball bearing steel, spring steel, tool steel, etc. In the chemical industry, chromite is mainly used to produce sodium dichromate, and then to prepare other chromium compounds, which are used in industries such as pigments, textiles, electroplating, and leather making, as well as catalysts and catalysts.

Industry Overview of Ferrochrome

Supply and demand analysis of ferrochrome in international market

According to statistics from the United States Bureau of Mines, as of 2002, more than 40 countries and regions in the world have discovered chromite, with a total reserve of 3.7 billion tons and a reserve base of 7.4 billion tons. Chromite is mainly concentrated in South Africa (reserves of 3 billion tons, reserve base of 5.5 billion tons), Zimbabwe (reserves of 0.14 billion tons, reserve base of 0.93 billion tons), Kazakhstan (reserves of 0.32 billion tons, reserve base of 0.32 billion tons), Russia (Reserves of 0.04 billion tons, base reserves of 0.46 billion tons). Other countries with relatively large reserves include Finland, India, Brazil, and Turkey.

World chromite reserves distribution
World chromite reserves distribution

According to the International Chromium Development Association (ICDA) data, the world’s ferrochrome consumption in 2020 will be 5.4 million tons, the supply of ferrochrome will be 5.25 million tons, and the supply gap will be 150,000 tons. It is estimated that the world’s stainless steel crude steel output in 2021 will be 24 million tons, the demand for ferrochrome is expected to be 5.6 million tons, the supply of ferrochrome is only 5.45 million tons, and the supply gap is still 150,000 tons. It is expected that in 2022, the world ferrochrome market will continue to be in short supply, and the supply gap will reach 200,000 tons. As the new capacity is put into production, subsequent supply will improve.

Expected growth point of new demand for ferrochrome

It is expected that the new growth point of demand for ferrochrome will be reflected in the stainless steel consumption industry. Chromium is an important raw material for smelting stainless steel. In China, in recent years, with the rapid development of industries such as automobiles, construction, and adding, the consumption of stainless steel is increasing at a rate of more than 25% per year. Some people believe that China’s apparent consumption of stainless steel will reach 5 million tons by 2027, which is equivalent to the current consumption of the entire Europe.

Production of stainless steel
Production of stainless steel

According to the announcement by the Stainless Steel Branch of the China Special Steel Association, China’s stainless steel production will reach 1.77 million tons in 2020, an increase of more than 60% over the previous year. For a long period of time in the future, the huge consumption potential of stainless steel will drive the increase in demand for ferro chrome.

Analysis of Ferrochrome Price Trend

Summary of ferrochrome price trends in recent years

From the beginning of 2019 to the middle of 2020, the ferrochrome market got rid of the downturn for many years, and the ex-factory price of high-carbon ferrochrome rose from 3100-3300 yuan/basis ton to more than 7,000 yuan/basis ton. The ferro chrome price per kg is as high as 7 yuan. The main reason that supports the sharp rise in the price of ferrochrome is that the rapid growth of domestic demand in China has triggered the continuous rise of ferrochrome prices in the international market.

Starting from the third quarter of 2020, due to the new round of the new crown epidemic, the international ferrochrome price has dropped significantly. By August 2020, the price of imported high-carbon ferrochromium (Cr60-65%) in the United States has fallen to 60-63 cents per pound of chromium. The price of low-carbon ferrochrome (0.10% carbon content) fell from 102-105 cents/lb chromium to 99-103 cents/lb chromium. China’s domestic ferro chrome price is lowered to 6000-6200 yuan/basis ton.

In September, the international spot market price of ferrochrome continued to fall. The high-carbon ferrochrome price in India was 50-55 cents per pound of chromium, and the price of high-carbon ferrochrome in China was around 5700-5900 yuan/basis ton.

New ferrochrome price expectations

Chromite mining
Chromite mining

According to chrome ore traders, due to the high spot market price of chrome ore and the cancellation of processing trade, ferrochrome producers are slow to purchase and will not have new orders in the near future, so they will wait and see in the short term. But in the long run, it is inevitable that the ferro chrome price per ton will fall. According to the calculations of professionals, the price of chromite ore acceptable to China’s ferrochrome processing industry cannot exceed USD100/ton.

Since the international spot price of chromite ore has more than doubled this benchmark, processing companies are facing industry-wide losses. Based on the consideration of achieving a win-win situation between industries, there is a certain room for decline in the imported chromite ore price. At the same time, affected by policies, the rapid growth of chromite imports has been controlled, and the shortage of supply will be eased. It is expected that the international imported chromite ore price will drop significantly from 2022.

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