Chrome Shortage May Cause Hindrance For Production Of Stainless Steel (2) ( Continued from our No.9423 dated February 12, 2008 )
In case to produce stainless steel, the cost to be shared for chrome is usually estimated at 8 - 9% in total of ferro-chrome and scrap ( according the data released in 2004 by Acerinox of Spain and Outokumpu of Finland ). Also, the cost to be shared for nickel is estimated at 45 - 47% in total, consisting of 28% of nickel metal and 20% of nickel scrap. Therefore, the cost to be shared for raw materials was said as 65% of the whole. However, owing to the steeply risen price of nickel as emerged in 2007 ( US$55,000 per metric ton for nickel metal ), the cost to be shared for raw materials had once raised to a level of 85%. Accordingly, stainless steel is a low value-added product.
At all events, the cost to be shared for chrome in production of stainless steel is considerably lower than that for nickel and, when the supply of ferro-chrome becomes short as chrome puts a small influence on the total cost, a big probability to rise price of ferro-chrome to a substantial extent will come up. At present, spot price of high carbon ferro-chrome in Europe has risen to a higher level of 200 - 220 US-Cents per lb. of Cr. Also, spot price of charge chrome in the USA has risen to a high level of 170 - 180 US-Cents per lb. at present. In addition, low carbon ferro-chrome was sold in last week to India at 315 US-Cents per lb. of Cr for carbon 0.1% max. material.
When prices of ferro-chrome have risen further to a considerable extent, a scene to examine up to which price level are stainless steel mills able to pay is thought to appear, because it is not possible to produce stainless steel without chrome. In May of 2007 when LME nickel price had risen to an extraordinary high level of US$55,000 per ton, stainless steel mills and electrical household apparatus manufacturers commenced to leave from use of nickel. Stainless steel mills have inclined to produce more chrome-based stainless steel and have developed to use low nickel contained pig iron produced in China. As no substitutive material for ferro-chrome has existed, a scene to examine whether a shortage of ferro-chrome influences on production of stainless steel or stainless steel mills continue to purchase ferro-chrome at higher prices is coming to be just around the corner.
As a scenario for the future, the following cases are pointed out ; (1) Reflecting the steeply risen prices of ferro-chrome, prices of chrome-based stainless steel products are anticipated to rise and, consequently, mills will incline again to produce more nickel-based stainless steel ( causing to shrink the share of chrome-based stainless steel )., (2) In view of the fact that China has set up the structure to produce 10 million tons per annum of stainless steel, there is a probability to enlarge Chinese purchases of ferro-chrome from Southern African producers ( such as Tubatse Plant, ASA Metals and Zimasco ) by means of utilizing their interests built up through the investments in Southern African enterprises., (3) Stainless steel mills, which have been concentrating their purchases of ferro-chrome on Southern African producers, will be affected considerably by the cutback on production of ferro-chrome in South Africa., and so on.
On the other hand, in case that new projects to produce ferro-chrome in South Africa are driven to freeze for the time being because of a shortage of electric power, it is strongly interested in knowing how extent is it possible to rely on supplies of ferro-chrome from other sources. Kazakhstan has planned to produce newly 300,000 tons per annum of ferro-chrome from 2010 ( on the assumption that chrome ore is able to secure ) but this increase of the production is not possible to supplement the tightening supply of ferro-chrome. Etibank of Turkey has taken over Vargon Alloys of Sweden ( with capacity to produce 200,000 tons / year ) and an advantage of Turkey, where is a country having preserved chrome ore as raw material, will be vitalized. The plant of Vargon Alloys has adjoined hydroelectric power generation station.
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