Posted on 24 Oct 2024
Tsingshan Group, China's leading global stainless steel producer based in Zhejiang province, East China, announced on October 22 that was dropping its bid price for high-carbon ferrochrome to Yuan 8,095/tonne ($1,135.3/t) including tax for FeCr deliveries by December 10. This marks a further reduction of Yuan 200/t from its September 24 bid for November deliveries.
The company's latest cut marks the fourth consecutive month for Tsingshan to table lower bids. While the market had anticipated a drop in FeCr prices for October, the magnitude of the decrease was greater than expected, an FeCr smelter official said. "The scale of this cut caught many in the industry by surprise," she told Mysteel Global.
Tsingshan's reduced bid has exerted downward pressure on the high-carbon FeCr market in North China's Inner Mongolia, with the result that prices there this week have fallen by Yuan 100/t on week to settle at Yuan 8,100/t, the lowest since November 2022, according to Mysteel's assessment.
Just last week, market sentiment appeared more optimistic, bolstered by Tsingshan's decision to raise its bid for nickel pig iron (NPI), another key raw material for stainless production. For November deliveries, Tsingshan raised its NPI bid by Yuan 40/mtu to Yuan 1,050/mtu, a bold move that provided some temporary support to the NPI market, as reported.
However, despite expectations that Tsingshan's stronger margins from stainless sales could lift the FeCr market, the prices for stainless steel – in both the spot and futures markets – have begun to weaken, curbing optimism. As of October 22, the price of Hongwang 304-grade cold-rolled (CR) stainless coil in Wuxi had dropped by Yuan 200/t on the week to Yuan 13,750/t, according to Mysteel's data.
The weakening stainless steel prices have inevitably squeezed profit margins for major producers like Tsingshan. Mysteel's survey found that Tsingshan's profit margin for producing 304 stainless cold-rolled coil (CRC) using domestic NPI and high-carbon FeCr had dropped from 2.23% over the past week to reach 1.25% by Tuesday.
"Tsingshan is under pressure to lower its FeCr bid prices as its margins have been squeezed by high NPI procurement costs and falling stainless steel prices," remarked the smelter official. "However, the scale of the bid reduction was much larger than anyone anticipated."
In response to Tsingshan's aggressive price cut, some FeCr smelters, particularly in southern China where electricity prices for smelting are higher, are considering maintenance stoppages to reduce supply. This may provide an opportunity to alleviate the oversupply situation that has been weighing on the FeCr market in recent months, market sources observed.
Mysteel's daily tracking indicates that the cost of producing high-carbon FeCr in electric furnaces (EFs) in South China's Guizhou, where electricity is supplied by Southern Grid, reached Yuan 9,341/t as of October 22. This cost level is significantly higher than both the spot price and Tsingshan's latest bid price, putting additional pressure on smelters.
Despite these challenges, some cost support remains in place for the FeCr market. The list price for chrome concentrate (Cr content 40-42%) from South Africa, tracked daily by Mysteel, has held steady at $270/dmtu at Tianjin port for nearly a month since September 24. This consistent price for chrome concentrate may help stabilize FeCr prices in the near term, according to market insiders.
Source:Mysteel Global
