South African rand rising above Rand 13 to the dollar this week from Rand 13.30-13.50 a week earlier is pushing up UG2 chromite prices, market sources said Friday.
The disconnect between prices of South African chromite feedstock, which China imports, and Chinese ferrochrome prices is widening and this may force Chinese local ferrochrome producers to cut production, sources added.
One Chinese trader and one non-South African miner said South African 42% UG2 was offered Thursday at $400/mt CIF China, up from the previous offer at $390/mt CIF China.
A UG2 seller said prices were not coming down, but declined to elaborate further on the actual offer level.
Chinese buyers have bid at $320/mt CIF China.
Ferrochrome smelters typically require 2.5 mt of chromite feedstock for 1 mt of ferrochrome production. Chromite feedstock accounts for roughly 30% of the total production cost, ferrochrome producers said.
UG2 at $400/mt would result in ferrochrome production cost of $1.30/lb or more, while $320/mt feedstock $1.08/lb or more, based on this cost analysis.
Chinese stainless steelmakers February ferrochrome purchase prices were at Yuan 9,300-Yuan 9,600/mt ($1.03-$1.06/lb). One mill may announce its March price next week, said one ferrochrome producer.
One China-based trader reported hearing Turkish 42% ore lumps sale at $420/mt CIF China, seller a small miner supplying a few thousand tons per month.
No other trades were reported.
Typically, UG2 prices are $60-$70/mt below Turkish 42% lumps, said a mine source. "It is logical to buy Turkish ore. If I were a buyer, I would buy whatever I find in Turkey, Pakistan and Albania," he said.
But traders said Chinese buyers bids were far below, at $350/mt CIF China for Turkish material and South African LG chromite, and $320/mt CIF for UG2.
Meanwhile, chromite stocks at China's main ports of Tianjin, Dalian, Shanghai, Zhenjiang and others, are increasing, sources said.
"The chrome ore stocks level at Chinese ports is 1.78 million mt and unless we see this coming down, prices should fall. Ferrochrome producers in China have lowered production utilization rates and this is a concern from a price sustainability perspective," Managing Director at Core Consultants Lara Smith said.
The miner said ore stocks in China are increasing and they may have hit 2 million mt this week.
Meanwhile, the UG2 seller maintained that ferrochrome demand in China will rise as Chinese stainless steel plants are expected to ramp up output recovering from the Lunar New Year lull, creating tightness in ferrochrome supplies.
