Chromium Market Growth Continues, But Ferro-Chrome Producers Face Headwinds

Jan 27, 2014, 10:12 ET from Roskill Information Services

LONDON, January 27, 2014 /PRNewswire/ --

At end-2013, ferro-chrome prices remained near four-year lows.  European benchmark charge chrome prices were rolled-over at US¢112.5/lb in Q4, while Chinese domestic spot high-carbon ferro-chrome prices stood at US¢83-85/lb.  World ferro-chrome consumption reached a record level of 9.8Mt in 2012, however, and demand was estimated to have risen by a further 6% to 10.3Mt in 2013.  The diverging trends reflected the expansion in the Chinese ferro-chrome industry, low ore prices and currency depreciation in leading exporting countries.

China soaks up more ore as domestic ferro-chrome output soars

In 2012, China overtook South Africa to become the largest producer of ferro-chrome worldwide.  Chinese output of 3.12Mt accounted for 33% of the world total, a rise from 13% in 2005.  With low chrome ore reserves and production, growth of 20%py in Chinese ferro-chrome output has been based on imported raw materials, mainly from South Africa but also from Turkey, Oman and Albania.  Imports from South Africa in the first nine months of 2013 already exceeded the 2012 total, with two-thirds comprising UG2 concentrates.  Concern over the displacement of South African ferro-chrome production by Chinese material smelted from South African ores and concentrates has stimulated debate over the introduction of an export tax or quotas.

Demand for ferro-chrome closely reflects trends in the stainless steel sector, which accounts for 80% of consumption.  Over the past five years, world consumption has risen by 5%py to an estimated 9.8Mt in 2012.  Similar growth is forecast through 2018, slightly outpacing the rise in stainless steel production due to the shift towards steels with higher chromium content and marginally lower scrap ratios.  China will continue to drive growth in demand, increasing its share of the world market from 46% to around 53% over the next five years.

Over-supply could lead to industry consolidation

Future Chinese ferro-chrome demand will be met by both increased domestic supply and imports.  Domestic production capacity is projected to rise by 1.8Mtpy over the next five years, with output increasing by 30% to 4.2Mt over the next two years.  In order to secure raw material supply, Chinese companies have invested in chrome ore operations in South Africa, Zimbabwe, Turkey, Albania, Pakistan and the Philippines.  Growth in ferro-chrome demand is unlikely to translate into higher prices in the short-term.  Planned capacity expansions in China, Finland, Kazakhstan, Oman and South Africa could raise the world ferro-chrome supply by more than 2Mt between 2012 and 2014, resulting in a potential over-supply of up to 700,000t ferro-chrome in 2014.  In the longer-term, the ferro-chrome market is forecast to move into balance through 2018.  

The net increase in ferro-chrome supply is projected at 3.5-4Mtpy over this period, lower than the total announced potential capacity, as over-supply on the world market, higher production costs and power supply problems in leading producing countries result in the closure of less-competitive plants or in consolidation between producers.  The market for both chromite and ferro-chrome would be significantly affected by any restrictions placed on future South African chromite exports, however, as an introduction of export duties or quotas on the supply of chromite raw materials to Chinese ferro-chrome producers would exert upward pressure on prices.

Chromium chemicals buoyed by Asia while metal soars on aircraft build-out

The long-term decline in demand for chromium chemicals on environmental grounds in industrialised countries has been offset in recent years by growth in Asian markets.  Leather tanning and metal finishing are the main applications for chromium chemicals, accounting for around half world demand.  Forecast growth of 2%py suggests world consumption will rise from 700,000t sodium dichromate equivalent in 2012 to 780,000t in 2018, still below current installed viable capacity of 860,000tpy.

In contrast, world consumption of chromium metal rebounded strongly after the 2008/09 recession to peak at 43,000t in 2012.  Driven by growth in aircraft deliveries, increased production of wide-body builds and higher demand for nickel-based superalloys to raise fuel efficiency, demand for chromium metal is projected to rise by more than 4%py through 2018.  Supported by higher capacity utilisation rates and production costs, spot prices of 99% chromium metal are estimated to firm from US$8,700/t at end-2013 to the H1 2012 level of US$12,000/t, with prices of 99.4-99.9% Cr material reaching US$14,500/t.

Roskill's new edition of Chromium: Global Industry Markets and Outlook  report, profiles over 200 current and potential producers and processors of chromite, ferro-chrome, chromium metal and chromium chemicals, to give an overview of the entire supply chain.  The report analyses trends in international trade flows, demand, end-use applications and prices, providing a comprehensive review of the chromium market and its prospects. This latest edition is available to order by Telephone : +44-20-8417-0087, Fax +44-20-8417-1308 Email: info@roskill.co.uk or Web: http://www.roskill.com/chromium.

Note to editors

Roskill Information Services Ltd. of London, UK is a leading provider of multi-client and bespoke market research services to the minerals and metals industry.

Roskill's new Chromium: Global Industry Markets and Outlook, 12th edition 2014 report contains 428 pages, 122 tables and 286 figures plus an appendix of international trade statistics.  It provides a detailed review of the industry, with subsections on the activities of the leading producing companies. It also analyses consumption, trade and prices.

For further information on this report, please contact Patrick Stratton (pstratton@roskill.co.uk). To be added to our press distribution list, please contact Pedro Palma (pedro@roskill.co.uk).


SOURCE Roskill Information Services