Rising nickel prices, coupled with a slight overreaction to the 30 million tonnes of Vale iron ore being removed from the market in March has offered support to steel and stainless steel prices. However, this is unlikely to have any meaningful impact further upstream on chrome and ferrochrome which continues to be impacted by overproduction.
While there was some positive movement in the first few days of March for chrome, the overall trend for chrome and ferrochrome prices is overwhelmingly negative, with prices expected to fall further during March, ahead of the 2Q19 benchmark settlements. Chrome producing countries, South Africa and Zimbabwe may be experiencing political and economic challenges, but output for both chrome and manganese is still on the rise. As such, we expect that stocks at Chinese ports will continue to remain elevated, negatively impacting price negotiations.
Stocks at Chinese ports are estimated at 3 million tonnes. Bids for ferrochrome from major Chinese steel mills have been slightly raised, following three consecutive months of no movement, but we expect these to succumb to negative pressure during the second quarter.
Another factor weighing down ferrochrome markets is the capacity levels in China. Capacity expanded by 600,000 tonnes in 2018, with output up 6.84% to 5.27 million tones. We expect capacity expansion to slow in 2019, but we are still forecasting growth in output of 4.21% y.o.y.
Until we start seeing meaningful capacity being taken offline, we do not foresee any positive turnaround for the chrome and ferrochrome markets.