Ferrochromium Market Review in 2022 and Outlook in 2023

In 2022, the global inflation rate will reach the highest level since the 21st century. Under the impact of the epidemic, China’s economy is also facing the triple pressure of “demand contraction, supply shock, and weakening expectations”. The ferrochromium market is in constant pain. First, the iron price is “led by the nose” by the ore price, and the profitability of the factory is greatly reduced. Then, the rebound of the epidemic and the tightening of demand put pressure on the factory’s sales, and the cost contradiction gradually transitioned to a supply-demand contradiction.

1. Review of the domestic market in 2022

(1) Price analysis

1. Trend analysis of high carbon ferrochrome

The characteristics of the price trend of high carbon ferrochrome in 2022: 1. The price fluctuation is narrowed, and the factory profit is reduced. 2. Cost orientation is becoming more and more obvious. 3. The epidemic situation has caused changing demand.

The first quarter: Downstream demand slowly recovered. During this period, individual factories in the south went deep into the north to purchase and accelerate the consumption of ferrochrome. Market inquiries and transaction activity rose rapidly, and iron prices began to increase.

The second quarter: The cost-oriented effect is obvious, and the internal and external market of chrome ore has risen rapidly, forcing the iron price to continue to rise to the highest point of the year. Subsequently, the negative impact of the epidemic deepened, and iron prices changed from strong to weak.

The third quarter: The continuous cost reduction created conditions for the sharp “diving” of iron prices. The economic environment is not good, the concentrated production reduction of steel mills leads to a pessimistic market attitude, the social supply of ferrochrome cannot be digested, the price competition is becoming more and more fierce, and the iron price falls to the low point of the year.

The fourth quarter: the strike in South Africa prompted the ore price to strengthen again, the ferrochrome industry suffered from prominent losses, the production schedule of stainless steel returned to a high level, the relationship between supply and demand was readjusted, and the iron price rebounded strongly.

2.  Trend analysis of low carbon ferrochrome

In 2022, the price of low-carbon ferrochrome will roughly show an “N-shaped” trend, with a difference of nearly 5,000 yuan/60 basis tons between high and low prices, and an annual average price of about 14,600 yuan/60 basis tons, a year-on-year decrease of 4.6 percentage points.

The first quarter: The price of raw and auxiliary materials continued to rise, which drove the sharp rise of low-carbon ferrochromium. In addition, international military conflicts and export orders broke out, helping iron prices to rise rapidly.

The second quarter: Under the support of rising costs and prices, iron prices continued to “take off”. At the end of April, the price reached the highest point of 17,600 yuan/60 basis tons in the year. Afterwards, downstream demand “shrunk” significantly due to the epidemic, and low prices continued to emerge.

The third quarter: Due to the intensification of losses, low-carbon ferrochrome factories successively began to reduce production and self-insurance operations, replenishment of short positions in the intermediate and terminal links, the transaction ushered in a wave of “small climax”, and the iron price successfully bottomed out and rebounded.

The fourth quarter: the supply is tight. At the end of the year, some end users started the “winter storage” mode in advance. The inquiry of low carbon ferrochrome has improved, the factory quotation has returned to firmness, and the iron price has strengthened again.

(2) Interpretation of fundamentals of market supply and demand

1. Domestic production of high-carbon ferrochrome increases

In 2022, the cumulative output of high-carbon ferrochromium in the country will be 6.4543 million tons, an increase of 525,700 tons or 8.87% year-on-year, and the output will increase sharply and return to the level of more than 6 million tons.

2. Comparative analysis of monthly output

In 2022, the average monthly output of high-carbon ferrochrome will be 537,900 tons. In addition to the factors affecting the Spring Festival holiday in February, the overall output of high-carbon ferrochrome remained at a relatively high level in the first half of the year, mainly because iron prices and downstream demand conditions were acceptable, most factories were able to make profits, and production enthusiasm was protected. Since the second half of the year, especially in the third quarter, the downstream demand has dropped sharply. After the oversupply of ferrochrome, the price of iron has been adjusted sharply, and the factory has turned into a loss-making state. It spontaneously reduces operating pressure by reducing production. In addition, factors such as power cuts in summer also affect output. The production of steel mills recovered in the fourth quarter, and the demand for ferrochrome increased, which has a certain stimulating effect on the increase of ferrochrome production. However, the production of factories is still upside down, so the output has a gap compared with the same period last year.

3. The output of low micro-carbon ferrochrome increased slightly

In 2022, the cumulative output of low-carbon ferrochrome nationwide will be 579,500 tons, a year-on-year increase of 20,400 tons or 3.65%. This year, the output of low-carbon ferrochromium continued to maintain a positive growth, and the output was above 50,000 tons for more than half a year throughout the year. Among them, the iron price fell to about 12,500 yuan/60 basis tons in July and August, and the whole line of the factory suffered serious losses, and the output fell to a new low level in the year. Later, due to the gradual recovery of production profits, the output of low-carbon ferrochromium returned to the normal position.

4. Imports of high-carbon ferrochrome decreased

According to customs data, from January to November 2022, a total of 2.2639 million tons of high-carbon ferrochromium was imported, a year-on-year decrease of 169,800 tons, or a decrease of 6.98%. The total import volume of high-carbon ferrochromium is expected to be about 2.48 million tons in 2022, which is lower than the 2.63 million tons in 2021. In the first half of the year, the European benchmark price of ferrochrome continued to break through new highs, diverting imported high-carbon ferrochrome resources to a large extent, resulting in a significant decrease in domestic imports. Since the second half of the year, due to the energy crisis, consumption in the iron and steel industry has been sluggish, and iron prices have been lowered one after another. Imported high-carbon ferrochromium resources have returned to the Chinese market, and the average monthly import volume has also risen to about 250,000 tons. From the point of view of import source countries, the number of imported high chromium resources has decreased from 21 to 17. Overall, the composition of imported high chromium resources is still full of diversity. Among them, the top three import source countries are still: South Africa accounted for 48.88% (down 0.33% year-on-year), Kazakhstan accounted for 23.94% (down 0.31% year-on-year), and India accounted for 11.60% (up 0.43% year-on-year). In addition, Zimbabwe’s imports have increased linearly this year, accounting for 10.99% of the total from 5.38% last year.

3. The direction and outlook of the market in 2023

Chromium ore is highly dependent on imports. With the popularization of large-scale submerged arc furnaces and sintering processes, the consumption of chrome concentrate in South Africa has increased. Chromium miners are very easy to unite the front, and it is difficult to get rid of the dominant influence of ore prices on iron prices.

There is still a risk of overcapacity in ferrochrome production. Traditional and new technologies are competing, and the subsequent production situation of southern ferrochrome factories will be more severe. Cost advantage is still the first priority for survival.

Geographical conflicts have led to energy crises in the European market, a decline in alloy consumption, and the return of overseas ferrochrome to the Chinese market may cause a certain supply pressure.

The epidemic situation is completely released. Although there is a certain buffer period, there are generally optimistic expectations for the economic prospects next year. Stainless steel production capacity has not been put into production or accelerated on time, which is good for the ferrochromium consumption environment.

In summary, next year’s high-carbon ferrochrome supply flexibility will vary with costs and demand. Costs can continue to provide support for iron prices, but at the same time limit the profitability of factories. Risks and opportunities coexist, being “stuck” by upstream and downstream, and it is difficult to open up profits. To a large extent, the factory’s pricing discourse can only be obtained by adjusting its own supply and demand relationship.

Lishi Industrial Ferro Chrome

Anyang Lishi Industrial Co., Ltd. is a ferro chrome alloy manufacturers in Anyang City, Henan Province, China. The ferro chrome factory of Lishi Industrial covers an area of 4500 square meters. At present, there are two production lines, 6 sets of vacuum furnaces, and a monthly output of 4800 tons. We are ferro chrome suppliers of high carbon ferrochromium, medium carbon ferrochromium, Low carbon chromite, Micro-carbon ferrochromium, We offer high quality ferro chrome with low pricesSincerely welcome customers from all over the world to our company, to order satisfied products!


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