Handicaped in heaven
There has been quite a development recently in the ferrochrome market, specifically after Merafe Resources has officially announced discontinuation of publishing its European Quarterly FeCr Benchmark (EQB). This was one of the leading indicators for FeCr market in Europe and globally for decades. Now understanding supply/demand balance as well as market dynamics has become even more complicated and complex.
Following this move, there were many initiatives announced to substitute or take over the role of benchmark. Including but not limited to major publications promoting their indexes, major alternative producers attempting to substitute Merafe, metal exchanges and internet metal shops, exchange replicas suggesting expanding into ferrochrome, as well as synthetic indexes constructed from averaging of import data for Charge Chrome and HC FeCr started to be developed for some regions.
EQB was used primarily by Charge Chrome and stainless markets, providing overall market direction and allowing for surcharge calculation. Yet, due to large variety of other chrome related products, such as Refined FeCr and HGHC FeCr, which are used not only in stainless-steel and have a significant market share, EQB was not a good indicator of supply/balance dynamics.
Majority of High-Grade HC FeCr is sold to mature markets at the levels linked to high indexes, while due to slowed demand in EU/USA some part is sold to China, at the price level close to prevailing Bidding Prices in China, which are significantly lower than indexes for High-Grade HC FeCr ex-China.
Since HC FeCr is different from Charge Chrome by its production, supply/demand structure and its price difference can reach tenths of percentages between these products. It also suffers from lack of price discovery, due to low liquidity on the spot market.
The situation happening on the market of HG HC FeCr is the result of inability of the existing market mechanisms to adopt current market situation, thus falling into “running circle” situation, traditional HG HC losing its market share to mid-grade FeCr due to inability to decrease price on the background of high indexes and indexes stay at high level due to non-liquidity of spot market, with difference between low and high price levels reaching close to 30%.
Since there is no separate index for Mid-Grade material, and the spot market is significantly smaller than the long-term contract one, the price level for Mid-Grade material is approximately somewhere between Charge Crome and HC FeCr price.
SoftMetal developed in order to include organically variety of above options, starting from general exchange type trade with general parameters, until refined search with very specific product, delivered to particular location. We believe it is tailor made for market participants to be able to see the whole market, including tonnages and prices, by creating their own index they will be able to understand the competition as well as see how much material is required by market at any given time. Its Global Metrics is updated automatically after each deal, thus showing market changes in real-time.
