High Level Interview on Chrome Market By ICDA and Ferro-Alloys.com

      Victor,Senior Analyst from ICDA;  Karl Liu ,CEO from Ferro-Alloys,com of Chinmetal information Tech Co in Beijing, made interview on Chrome market and relative topics on line. and we summerized some as below

1. Victor：What were the main challenges faced by the ferrochrome and stainless steel industries in China in 2019? What is your feeling about the previous year? Was it positive? Were the results expected or not?

Karl: The main challenge was oversupply of FeCr in China market in 2019.  Chinese Stainless steel faced the same issue. The output of of FeCr  in 2019 was much higher than before in China，meanwhile China imported more FeCr from other countries.The price of FeCr was gradually declining all over the world last year. It was not positive for the Chrome industry with surplus supply,and the relative insiders in whole supply chain , especially most of the traders lost money in the Chrome industry.  It was expected because more and more output of chrome ore and alloys produced, but the demands from Sstainless industry was reduced due the change to S400 and S200 series production were produced.

2. Victor: It appears that ferrochrome production in China was up 13% year-on-year in 2019, is the demand following?

          Karl : The output of FeCr production in 2019 was 5.97mln mt, compare with the output of 5.18mln mt in   2018.which it was increased by 0.79mln mt about 15.3% up than 2018. China produced about 30mln mt crude stainless steel in 2019, compare with 26.7mln mt in 2018. which it was 2.3 mln mt about 8.6% increased than 2018. The oversupply of local FeCr production was about100,000mt (imported FeCr not included).

3. Victor: How did the apparently dampened downstream demand and generally subdued global economic context affect the market in 2019?

?Karl:   Overview the subdued global economic context in 2019, the world economic growth was much lower than expected, that was effect by US trade tension with other countries includes China. Chinese economic growth reached 6.3% last year, that was the lowest in the past 30years, perhaps it is the highest rate in coming 10 years.

        On the view of industry chain ,The dampened downstream demand on Sstainless steel was heavily effected the market of ssteel , the smelters of Ssteel had to change their production structure, increased S200 and S400 series production, and reduced S300 series production, the smelters of Ssteel also had to use other cheap materials to replace or reduce chrome and nickel consumption. However, the supply of chrome ore  and Ferro chrome production were not adapted,and result of surplus supply.

4. Victor: Trade tensions between the US and China seem to be easing. Will this have an effect on the Chinese ferro chrome and stainless steel markets? Could we consider that these tensions impacted these markets before? Why?

Karl: The trade tensions between US and China ,mainly affected the economic development growth and export  , Chinese economic was hurt definitely by the tensions ; Export volume to US was declined and value of export was declined too, that damaged the small and medium producers in China,and the affected Result, some plants were moved to other countries due to high tariff imposed to China. Overview the affect on FeCr and stainless steel market in China, the depreciated currency increased the cost of chrome ore, and ferro chrome ,and effected the market of chrome. and finally affected ssteel production .and export of ferro chrome and Stainless steel to America were almost finished due to US high Tariff imposed. Such kind of heavy affect was not consider  before trade tension.

5. Victor: What are the main drivers expected to support the ferrochrome and stainless industries in China in 2020?

Karl:We did not find out any positive drivers to support ferro chrome market in 2020 , and the Chinese economy was effected by deadly virus outbreak, and the growth of economy sharply dropped and all industries hurt aggressively includes Steel and ferroalloys industry. Workers cannot go to work due to avoid virus spreading and more and more firms were bankrupted. Traders of chrome ore faced big problem of decreasing demands from customers and lose heavily while holding stock of chrome due to weak price. The big issue also is no transation and transportation to stop the chrome deal.The supply of chrome ore will be reduced if price dropped further, and that trend seems convinced in first half of the year. We predict the market of chrome will be better in second half of the year, following with the increase development of Chinese economy.if deadly virus completely disappeared.

6. Victor: To which extent will the unexpected coronavirus epidemic, arriving on the back of the Chinese New Year holidays, disrupt the ferrochrome and stainless steel markets and affect economic growth perspective for Q1 2020?

Karl :The unexpected epidemic disrupt the production for some plants because they cannot bring their workers and raw materials back due to traffic control. The HC FeCr prices has increased in China these days due to the rise of transportation fees of coke and chrome ore. And about 35% ferrochrome plants terminated or not full operated. Although the Novel Coronavirus Pneumonia leads to reduction of FeCr , the end users demand on ferrochrome have not improved due to enough inventory..so such short increased on price will not last when the virus will be controlled.and traffic recovered. The 1Q of Economic development is hig influenced and whole industries have been affected, especially services, transportation, conferences and exhibitions, the growth rate is hard to predict, but if had 2% growth, which should be also good.

7. Victor: The demand for ferrochrome and stainless steel in China is highly correlated to the domestic market. With China economy maturing and probably shifting towards innovation and services, where will demand come from to sustain the existing production capacity in China?

   Karl :Chinese economy growth rate still is the highest even it was gradually down, but the citilization ratio is still lower than developed countries, the average demands of ssteel per person in China is much lower than other countries. The development of ssteel in China and Indonesia increased yearly, and we predict Chinese Ssteel output will keep stable in 2020 and demands on ferro chrome will be the roughly same as 2019.

On the long term view, Chinese sSteel industry will consume more scraps ,that will effect the demands of ferro chome since 2020.

8. Vitor: We’ve seen Tsingshan outsourcing some of its ferrochrome and stainless steel production to other countries such as Zimbabwe or Indonesia. Do you believe we will see other ferrochrome and stainless steels plants relocate outside of China? Why?

Karl: Tsingshan Group and other Chinese Ssteel Mills have plan to produce more ssteel outside of China, mainly in resource rich regions like Indonesia and Zimbabuwe, that is to reduce the cost of raw materials and avoid anti-dumping of ssteel production by other countries.

    Also, ferro chome plants will be established outside of China, that is because China has not had chrome ore , and it is not economy to produce fecr in China if the demands was declining. The only priority for Chinese smelter of fecr ,is cheap electric power and coke price, labor cheaper cost, and big market. if more ssteel plants will be set up outside of China, some Fecr plants will be fellowed, but that will not happened in short time.

9. Victor: Sustainability is currently a topic of global concern which is mostly driven by people putting pressure on their respective countries’ authorities for stronger environmental regulations.

Karl: I Yes, it is , t seems that China is getting actively involved in these issues through the implementation of environmental laws, that implementation will slow down the development rate but increase the quality of development and sustainability.

 The strict environmental Regulations will definitively be implemented and that will increase the cost of production, and reduce the competitiveness of Chinese production in the long term view.  But it is good to whole country and peoples living environment.

--Victor: Senior Analyst of ICDA, focus on research on global chromium industry On behalf of ICDA, and make presentation in ICDA conferences.

--Karl liu ,Director of ChinMetal information Tech Co.,ltd. Has almost 25 years experience of ferroalloys trade and 17 years industrial research and consulting.

As founder of Ferro-alloys.com, he has vast contacts with whole industry insiders and has arranged high level industry conference in China and Asian regions since 2004. He presented in several intl conferences on the view of ferroalloys outlook and knows very well the market and trend.

 Karl liu,got Bachelor Degree of Intl Trade, and EMBA in Ceibs.more about him, please take look at

https://www.linkedin.com/in/karl-liu-90b7543a/

• [Editor:admin]