Q3 2018 more of the same or change in trend?

As we expressed in our last column, the necessity for FeCr China Tender prices to break 7,000 RMB/t is apparent. Following the latest announcements by stainless-steel mill in China, it is safe to assume that this price is now a new support level.

Despite the modest increase of 200 RMB/t, we view it as a positive sign, taking into account continues growth in the spot market of both chromium ore and ferrochrome in China. These growths also come heading into Q3, which is widely considered the slowest time of the year for both ferrochrome and stainless-steel industries.

Will this growth continue? We believe so, especially based on the latest news of output reductions in the provinces of Fujian, Sichuan, Jiangsu and Hunan due to profitability issues. Additionally, there is a concern about possible future output disruptions and possible shutdowns in the major production hub of Inner Mongolia, after central China’s environmental inspection team arrives there.

These problems might push next China Tender Prices even further up, and though it is good news for the industry, be see increased volatility as a major problem. It would be preferable to continue modest price increases of few hundred RMB/t over the next quarter, rather than a thousand RMB/t or more jump, followed by 2-3 months slide.

China Tender Prices (Quarterly Averages) and EU Quarterly Benchmark

As you can see from the graph above, currently benchmark and China Tender Prices are continuing their trend, where benchmark continues to follow Tender Prices from China with a lag. Looking forward to Q3, benchmark might have to adjust to drops in China Tender Prices during Q2, and to summer period slowdown in stainless-steel production in EU.

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