South Africa’s ferro chrome exports rebound in May

• • Q3 benchmark prices decline on lower power costs

• • Demand from Chinese stainless steel mills support export flows

Mysteel Global: South Africa’s high-carbon ferro chrome exports recovered moderately m-o-m in May on a monthly basis. However, the year-on-year decline remained steep and the cumulative performance for the January-May period pointed to a deeper structural correction, Mysteel Global observes.The country’s high-carbon ferro chrome exports totalled 123,291 tonnes in May, up 5.7% from April and marking the second consecutive on-month increase, according to the latest data from the South African Revenue Service (SARS). But the volume still represented a sharp contraction of 29% from a year earlier, weighed down by a high base for comparison in May last year, Mysteel Global notes.

Ferro chrome shipments to China proved more resilient, reaching 41,234 tonnes in May, up 6.4% on-month and edging 1.3% higher on-year, the SARS data show. This underscores the relative strength of demand for the feedstock from Chinese stainless steel mills.

For the January-May period however, total ferro chrome exports from South Africa plummeted 49.1% year-on-year to roughly 540,088 tonnes, while shipments to China tumbled 46.7% to 197,205 tonnes over the same period, according to SARS figures.

On the pricing front, Japanese steelmaker Nippon Steel agreed with several South African ferro chrome producers on July 2 to lower the July-September loading price by around 3% from the previous quarter, marking the first quarterly price cut in six quarters since last year’s January-March quarter, according to market sources.

The new price was set at $1.64/lb (high-carbon ferro chrome, net content, delivered), down by $0.05/lb from the April-June shipment level. This was the same decline as the European benchmark ($1.56/lb) announced on June 30, they said.

The price revision came against the backdrop of recent progress in South Africa’s electricity tariff negotiations, after state-owned utility Eskom reached a negotiated pricing agreement with the country’s largest Ferro Chrome smelter, Glencore Merafe Chrome Venture. This gave effect to the previously approved Rand 0.62/kWh ($0.038/kWh) preferential tariff scheme for the domestic ferro chrome industry.

The tariff relief has provided local smelters with some room to ease production costs, which in turn has fed through to the quarterly pricing negotiations with buyers, Mysteel Global understands.

Market participants noted that supply-demand fundamentals for ferro chrome in both the European and Asian stainless steel markets have shown no major changes since April, suggesting that the tariff development rather than demand weakness was a key catalyst for the price adjustment.

Note: This article has been published in accordance with a content exchange agreement between Mysteel Global and BigMint.