October was characterised by an increase in both purchases and production owing to a number of positive factors including, higher benchmark price which rose 19c/lb in the fourth quarter, a resurgence in Chinese ferrochrome production, higher surcharges by stainless steel mills and the end of winter tariffs which saw the production rates in South Africa climb.
However, in the second half of October an announcement by the Chinese government, that producers should cut 50% of their production as part of pollution abatement efforts, saw the market spiral – panic selling amongst traders with purchasers preferring to wait for calmer seas. The market was somewhat buoyed due to the storms at Durban port, which affected a number of South Africa’s shipments and higher stainless steel surcharges, which rose for the third consecutive month in November. The effect however was a build up of chrome ore stocks at Chinese ports, which now stand at 2.5m tonnes compared to 2.3m tonnes in the middle of October.
South African ore prices declined by $40/tonne for 44% concentrates from mid-September to mid-October. November has been more stable and buying has resumed, but the overall sentiment is still negative.
A consideration of new capacity; Albania’s GSA has commissioned its demo plant running at around 1,000 tpm. The operation envisages two ferrochrome smelters in Elbsan, each with capacity of 12.5MVA and capable of producing a combined 40,000 tonnes per year.
Zimbabwe has also indicated that it wants to produce 300,000 tonnes this year. Overall the expectation is that Zimbabwe’s ferrochrome production is expected to rise to 300,000 tonnes this year, following the government’s allocation of chrome concessions to small mining companies as part of its effort to boost output. In the first nine months of the year, local ferrochrome processors produced 248,000 tonnes, up from 96,000 tonnes last year. ZimAlloys is now owned by India’s Balasore Alloys and the plan is to pay off the creditors and restart production.
Global production of stainless is expected to reach 47.5m tonnes this year. In particular, Japan’s stainless-steel production should reach an estimated 3.13m tonnes, the US’s around 2.75m tonnes and Europe’s 7.35m tonnes.
Looking ahead, we are expecting a strong 1Q18, and anticipate a higher benchmark price of $1.50/lb on the back of higher stainless-steel production.
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