US traders wary of pace of ferrochrome market
2010-02-12 10:42:52 【Print】
PITTSBURGH (Asian Metal) 12 Feb 10 – Ferrochrome prices in the US and Europe have grown at an almost unprecedented pace; nearly 30% in the past two months alone. Active traders, however, have called into question, however, the sustainability of the latest surge, and whether or not it will continue through the upcoming months.
Largely due to continued buying from the Chinese, ferrochrome prices rose from about USD0.90/lb before the end of 2009 to USD1.15-1.20/lb at present. Chinese stainless mills are running at close to capacity leading up to the Spring Festival holiday which starts on the 14th.
One large US-based trader noted, “There are a lot of Chinese importers still trying to get their hands on anything they can find. They will buy any and all ferrochrome on the expectation that the market is still appreciating.”
Overall prices are unlikely to fluctuate much in the near future as the largest buyers in the Chinese market take off for the holiday. Historically there has always been a boost in pricing when the Chinese buyers come back, and this year is likely to not be any different due to the pace of economic recovery worldwide.
A east coast US-based trader reported a three truckload sale earlier this week at USD1.15/lb, but had not seen any other business since then. The source expected prices, however, to continue rising as long as the Chinese kept buying.
“The US stainless industry is still not at the point that it leads on the prices. Everyone is looking to the Chinese market to see if the market will keep rising. So far it looks as if it will,” the source said.
Another US trader, who indicated current pricing at USD1.15-1.20/lb, expected a price correction was inevitable at some point. The source last booked a 40t sale late last week at USD1.16/lb.
“There is definitely a supply constraint internationally right now that is driving prices higher,” the source said. “A price correction is inevitable because the Chinese steel sector will have to cool down at some point; probably in Q3 of this year. When that takes place I think we will probably see [ferrochrome] back at USD1.05-1.10/lb, but certainly not at USD0.80-0.85/lb which we saw last year.”
Although the charge chrome benchmark pricing has come under fire in recent months for being almost irrelevant in today’s market, it is expected to be set around USD1.20. Some market participants believe USD1.30/lb is a possibility, but an oversupply situation is possible if such a benchmark price level is set.
