Global Ferro Chrome Prices To Stay High Over Near To Medium Term
The higher cost of production of smelters in China and South Africa led to an upward shift in the cost curve globally, which is keeping ferro chrome prices elevated
Globally, ferro chrome prices remain significantly higher than pre-Covid levels, in contrast to prices of manganese-based ferro alloys like silico manganese and ferro manganese which have almost retreated back to pre-Covid levels, said Icra in a report.
The rating agency added that the higher cost of production of smelters in China and South Africa (which account for around 69 per cent of global ferro chrome production) led to an upward shift in the cost curve globally, which is keeping ferro chrome prices elevated. Globally, China (around 48 per cent in CY2023) and South Africa (about 21 per cent) are the largest producers of ferro chrome.
Chinese smelting costs remain heavily influenced by the seaborne prices of chrome ore for which it is totally dependent on imports, mainly from South Africa. In this context, the ongoing logistics bottleneck in South Africa has resulted in elevated prices for imported chrome ore over the last few quarters. In addition, electricity costs in South Africa, which influence their smelting costs, have been rising steeply.
This has boosted the production cost for South African smelters, according to Icra.
The logistical crisis in South Africa is attributable to Transnet, which is the country’s largest freight rail transport operator, currently grappling with a major locomotive shortage along with structural issues like systemic underinvestment in railway infrastructure due to limited funds and theft of railway infrastructure equipment. This has crippled the railway infrastructure and is consequently leading to supply bottlenecks.
Icra added, “An upward shift in the cost curve for the leading ferro chrome producers globally is likely to keep global prices elevated over the near to medium term.” Stainless steel production, where ferrochrome is used as an alloy, continues to remain strong, mainly driven by China and other Asian countries, which is lending support to ferrochrome prices globally.
Domestic integrated ferro chrome players having captive mines under the earlier allotment regime, where there is no revenue sharing with the State Government, have benefitted from the high ferro chrome prices prevailing globally leading to superior profitability compared to the pre-pandemic levels.
