TELF AG explores Ferrochrome Market: Balancing Supply and Demand Amidst Industry Challenges
Central elements
Ferroalloys are essential in producing stainless steel as alloying elements that impart desirable properties such as corrosion resistance and high-temperature strength. Among the various ferroalloys, ferrochrome (FeCr) is the most critical, with chrome content ranging from 50% to 70% and used in up to 80% of all stainless-steel grades. Several factors, including the availability of raw materials, demand from end-users, and production capacity, influence the market for ferrochrome.
One of the current issues in the ferrochrome market is the tight supply of metallurgical grade chrome, a key input material in FeCr production. South Africa, the leading producer of chrome ore, has yet to announce any expansion plans for the previous year, contributing to the scarcity of supply. On the demand side, the outlook is mixed, with some positive and negative factors affecting the market.
One positive factor is the low chrome ore inventories at China’s main ports, indicating strong demand from Chinese stainless-steel mills. Additionally, there is the possibility of capacity expansion of ferrochrome in northern China, which further supports the market. The strong prospect of the stainless-steel industry in China, the world’s largest consumer of stainless steel, is also a positive factor.
However, some large Chinese buyers remain bearish about the persistently subdued performance in the country’s chemical and metallurgical industries. This could lead to reduced demand for ferrochrome, negatively impacting the market.
In Europe, the market for HC FeCr has been vital in recent months, with sellers reporting an uptick in demand and greater visibility from end-users over future requirements. This has led to almost continuous price increases since November 2022.
The market has also been affected by transportation disruptions, such as the damage to the Northeast Corridor railway in South Africa due to heavy rains. The railway mainly carries Cr ore, FeCr, magnetite, coal, and phosphate exports from neighboring countries, and the disruption has led to supply chain disruptions and delayed deliveries.
On the production side, the Chinese output of HC FeCr increased significantly in February, driven by production returning to Southern Chinese producers. This was in response to electricity shortages that squeezed the region’s output in December and January. With the electricity supply improving in February, output was able to bounce back, and March is expected to show further growth.
In conclusion, the ferrochrome market faces several challenges and opportunities, with tight supply and transportation disruptions and strong demand and production growth. As a result, the market is likely to remain volatile in the short term, but the long-term outlook remains positive, driven by the development of the stainless-steel industry and the increasing demand for ferrochrome.
