Ferrochrome Friday Anyone?

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Ferro Alloys, Supply & Demand

Given all of the mixed signals on ferrochrome pricing – here is one story that talks about the price going up and here is another written by the same author one month ago about the prices going down And Purchasing.com is not the only one to go back and forth. Here is a smattering of stories written by us on ferrochrome – steady on July 8, the metal down on July 18 and today, well, let’s look at the price of ferrochrome in a different way shall we?

First, the Purchasing article from August 13 says the price is going to go up toward $3/lb. The article cites ferrochrome demand as strong because of global stainless steel making, though US prices for ferrochrome have been weak. According to the major producers of ferrochrome, CEO Steve Phiri of Merafe Resources of South Africa says pricing will remain strong due to stainless steel demand. In addition, supply disruptions and energy problems in South Africa “are expected to result in a deficit during 2008 and possibly into 2009.” So what to make of these projections?

Let’s examine end uses for ferrochrome because that will help tell the story on the demand side of the equation:

According to Wikipedia, 80% of the world’s production of ferrochrome is used in stainless steel. Other sources say 90% of the world’s production of ferrochrome is used to make stainless steel. Using our handy Pareto rule (that’s the old 80/20), we’ll just look at this one application for ferrochrome, stainless steel, as it will serve as the guiding force in predicting demand. Now here is something funny. Ironically, the “ferrochrome price is heading toward $3/lb” article from Purchasing contained a link to a story, also from Purchasing called, “Stainless Steel Demand and Prices are in a Slide/Outokumpu [editor’s note: the second largest stainless steel producer in the world] says stainless markets are oversupplied.” Umm… 

I’m having a hard time with $3/lb. Quick let’s check what others have to say about stainless demand:

According to this Forbes article from August 14, “ThyssenKrupp is exposed to the highly volatile stainless steel market, where earnings have slumped on the back of lower base prices and subdued demand from traders who postponed replenishing stocks in a bet that prices for nickel, a key raw material, would continue to fall.” And this article, again from Purchasing citing drops in nickel prices due to a weak stainless market in China and lower demand in the US and elsewhere. And finally this article from Reuters mentions Posco cutting stainless steel prices by 10% due to lower nickel prices.

There is more evidence that the stainless market looks a little less than perky. I’m not a betting woman but unless we have any major supply disruptions, I think the only place for ferrochrome is down.

–Lisa Reisman

Comments (3)

  1. Micheal says:

    My business has a stock of nickel scrap that we’ve stockpiled for a few months in an attempt to see if the prices would rise again. To me it seems like they’re only going down, but I’m still hoping. So in your opinion, would I be better off scraping the metal now, or waiting a few more months?

  2. admin says:

    By no means, construe this as advice. What you really have to ask yourself is what is the stainless market going to do? We feel it’s going to stay flat this year which would keep nickel somewhat depressed but it may/may not do so in 2009. It will depend on Chinese demand. The other issue is some nickel may come offline creating tighter supply. Take a look at your inventory carry costs and what the price would need to be for you to break even. Then you will have to make a determination as to what % increase will be needed from today’s price to bring you back to whole. Is it a 20% increase? 30% or more? That could help drive your decision…

  3. nabil abdelo halim says:

    please send daily prices of ferrochrome alloys

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