TELF AG delves into Uptick in High-Carbon Ferrochrome Prices

A relief for producers

The recent uptick in high-carbon ferrochrome prices in China has been a welcome relief for producers, but it has not been enough to alleviate the margin pressure they have been facing due to rising input costs. Despite the increased demand from end-use sectors and tighter supply availability from South Africa, Chinese smelters need help to maintain profitability.

In February, the China tender price for high-carbon ferrochrome rose to a monthly average of US$1.09/lb Cr, driven by improved sentiment in end-use sectors and tighter supply availability from South Africa. This price increase was a much-needed boost for producers grappling with weak prices in the previous months.

However, the rise in high-carbon ferrochrome prices has yet to translate into higher margins for Chinese smelters. Input costs, including electricity and raw materials, have also increased, eating into producers’ profits.

Electricity accounts for a significant portion of the production cost of high-carbon ferrochrome, and Chinese smelters have been hit hard by a surge in coal prices. In addition, the Chinese government’s efforts to reduce coal consumption as part of its decarbonization drive have led to tightening coal supplies and higher prices, putting pressure on smelters.

In addition to the rising cost of electricity, raw material prices have also increased. The cost of chrome ore, the primary raw material used in the production of high-carbon ferrochrome, has been rising due to supply disruptions in South Africa, the world’s largest producer of chrome ore.

The combination of higher input costs and the modest increase in high-carbon ferrochrome prices has left Chinese smelters with little room to manoeuvre. As a result, the margins for high-carbon ferrochrome production have been squeezed, and some producers have been forced to reduce output or even shut down operations.

In conclusion, while the rise in high-carbon ferrochrome prices in China has been a positive development for producers, more is needed to alleviate the margin pressure they have faced due to rising input costs. In addition, the Chinese government’s efforts to reduce coal consumption and supply disruptions in South Africa have increased electricity and raw material prices, putting pressure on smelters. As such, Chinese smelters must find ways to reduce costs and increase efficiency to maintain profitability in a challenging operating environment.