Transparency key for ferro-chrome markets in post-benchmark world - Fastmarkets

The ferro-chrome landscape changed rapidly and dramatically following the discontinuation in June 2024. In the intervening time, ferro-chrome market participants have been seeking to fill the void.

The key factor that has emerged from the market is “transparency.”

The end of the quarterly benchmark has meant a growing shift toward a new era of greater transparency, including a trend toward the use of spot pricing mechanisms, with clear, publicly available methodology that closely tracks market dynamics.

In the months after the discontinuation, market participants globally have been grappling not only with what the benchmark’s replacement could be, but with challenging market conditions.

For example, in Europe, the downstream markets for stainless and special steel have faced issues such as high (albeit fluctuating) costs and waning demand.

Prices for the most common grades of stainless steel fell during August, in line with lower alloy surcharge values.

In turn, the markets for high carbon ferro-chrome have shown persistently weak spot demand, even taking into account the traditionally quieter summer period, leading to reports of growing competition among sellers to secure deals.

In recent days, transaction prices have come down in the spot market, leading to a decrease in Fastmarkets’ weekly price assessment for ferro-chrome, high carbon, 6-8.5% C, basis 65-70% Cr, max 1.5% Si, delivered Europe. This fell to $1.40-1.90 per lb Cr on Tuesday September 3, from $1.53-2.00 per lb Cr the week before.

China, being a major producer and consumer of ferro-chrome, exerts a significant influence on global markets. Its production and consumption patterns can have a substantial effect on prices and supply-demand dynamics.

Successive declines in monthly tender prices from major stainless steel mills in the country, alongside high raw material costs, have continued to put pressure on spot markets.

High production rates of ferro-chrome have also continued in the Chinese domestic market, leading to persistent reports of oversupply.

Fastmarkets’ weekly price assessment for ferro-chrome, spot, 6-8% C, basis 50% Cr, ddp China has been falling gradually since July 2, and was 8,650-8,850 yuan ($1,214-1,242) per tonne at the latest assessment on September 3. This was down by a further 0.57% from 8,700-8,900 yuan per tonne the week before.

Elsewhere, geopolitical issues have continued to affect markets. These include, for example, the logistical challenges presented by the tensions in the Red Sea corridor, which have dogged shipments from India, a key production hub for high-carbon ferro-chrome with 60-64.9% chrome content.

Meanwhile, the weakness of demand in Europe has capped the upside for this material’s price, leading to further declines in prices in recent weeks.

Fastmarkets’ weekly price assessment for ferro-chrome, high carbon, 6-8.5% C, basis 60-64.9% Cr, max 3% Si, cif Europe was $1.04-1.20 per lb Cr on September 3, down by 0.89% from $1.05-1.20 per lb Cr the week before.

Alongside this, market participants have continued to look for a reliable, transparent alternative to the quarterly benchmark price.

The benchmark, a cornerstone of the industry for more than two decades, had become increasingly disconnected from the spot market, and had seen its relevance diminish toward the end of its run.

Feedback from across the ferro-chrome market globally suggested a strong preference for either Fastmarkets’ existing prices, or a combination of these with other pricing mechanisms. A producer-listed price announced in June has also been considered as a potential option.

Beyond the choice of a transparent pricing mechanism available in the public domain, there is also a growing consensus on the need for more frequent price updates.

A significant part of the market has come out in favor of weekly price assessments, as opposed to a quarterly figure that may not fully reflect the nuances of market dynamics between updates, such as price volatility and changes in demand and supply.

This shift suggests a clear desire among market participants for greater flexibility and responsiveness to changing market conditions.

Some market participants have also continued to support a quarterly indication, which Fastmarkets can seek to accommodate.

With commodity markets maturing, there is a clear trend toward more transparent and flexible pricing mechanisms.

And while the ferro-chrome market moves toward a future where long-term contracts may no longer be negotiated on the basis of a quarterly published price, daily and weekly price indications that reflect spot price trends, and that offer buy-sell opportunities to all sectors of the market, may provide that transparency.

The ferro-chrome industry now has an opportunity to move toward a more data-driven and market-oriented approach to pricing.

Fastmarkets, with its long history of providing price information to the metals industry, is already producing benchmark prices for ferro-chrome and will continue to support the industry in its development.

Fastmarkets continues to publish its ferro-chrome, lumpy Cr benchmark indicator, charge basis 52% (and high carbon), Europe, which has historically been strongly correlated with the actual quarterly benchmark, as a way to offer some continuity to the market.

The indicator has an eight-year history and uses weekly price inputs, reflecting up-to-date market dynamics.

It is calculated using Fastmarkets’ weekly price assessments for ferro-chrome 50% Cr import, cif main Chinese ports, and ferro-chrome, high carbon, 6-8.5% C, basis 60-64.9% Cr, max 3% Si, cif Europe.

The indicator is not a forecasting tool but provides a weekly snapshot of what the benchmark would be if it were negotiated on that day.

In addition to the benchmark indicator, Fastmarkets also provides a comprehensive overview of the global ferro-chrome market through its coverage of a range of other ferro-chrome prices, including charge chrome delivered to Europe, high carbon ferro-chrome of different grades, and prices for the Asian market.

Fastmarkets gathers data directly from the market, considering transactions, bids, offers and indications.

Data is stored securely and reviewed by trained team members before publication. This rigorous methodology ensures the market-reflectiveness and useability of Fastmarkets’ price assessments.

Fastmarkets encourages market participants to become data submitters for published prices. By contributing market intelligence, they also help to augment the transparency and relevance of Fastmarkets’ price information.

With the ferro-chrome markets moving into a post-benchmark world, using transparent, flexible and data-driven approaches can support a more resilient and efficient pricing system that better reflects underlying market fundamentals.