How is chrome ore priced?

How is chrome ore priced?

01
The international basic price of chrome ore is mainly set by Glencore and Samanco through consultation with trading parties.

Global chromium ore prices are mainly determined by market supply and demand conditions and follow the market trends. There is no annual or monthly price negotiation mechanism. The international chromium ore base price is mainly determined through negotiation between Glencore and Samanco, the world’s largest chrome ore producers, after visiting users in various regions. Manufacturer supply and user purchase prices are generally set based on this reference.

02
The global chrome ore supply and demand pattern is highly concentrated. In recent years, supply and demand have continued to loosen, and prices have fluctuated at low levels.
First, global chromium ore distribution and production is mainly concentrated in South Africa, Kazakhstan, India and other countries, with a high degree of supply concentration. In 2021, the total global chromium ore reserves are 570 million tons, of which Kazakhstan, South Africa, and India account for 40.3%, 35%, and 17.5% respectively, accounting for approximately 92.8% of global chromium resource reserves. In 2021, the total global chromium ore production is 41.4 million tons. Production is mainly concentrated in South Africa, Kazakhstan, Turkey, India, and Finland. The production proportions are 43.5%, 16.9%, 16.9%, 7.2%, and 5.6% respectively. The total proportion exceeds 90%.

Second, Glencore, Samanco and Eurasian Resources are the world’s largest chromium ore producers, and have initially formed an oligopoly chromium ore supply market structure. Since 2016, the two giants Glencore and Samanco have actively promoted mergers and acquisitions of South African chrome ores. Around June 2016, Glencore acquired Hernic Ferrochrome Company (Hernic), and Samanco acquired International Ferro Metals (IFM). The two giants further consolidated their positions in the South African chrome ore market, coupled with the European Asia Resources controls the Kazakhstan market and the supply of chromium ore has initially formed an oligopoly market structure. At present, the production capacity of ten large companies such as Eurasian Natural Resources Company, Glencore, and Samanco accounts for approximately 75% of the world’s total chromium ore production capacity, and 52% of the world’s total ferrochrome production capacity.

Third, the overall supply and demand of global chrome ore has continued to loosen in recent years, and the price game between supply and demand has intensified. In 2018 and 2019, the growth rate of chromium ore supply significantly exceeded the growth rate of stainless steel production for two consecutive years, which led to an increase in the supply and demand of chromium elements and triggered a continuous decline in chromium ore prices since 2017. Affected by the epidemic, the global stainless steel market has been overall weak since 2020, and the demand for chromium ore has been weak. On the supply side, affected by the epidemic in South Africa, international shipping freight, and domestic energy consumption dual controls, the supply of chromium ore has decreased, but the overall supply and demand are still in a relaxed state. From 2020 to 2021, the price of chromium ore has declined year-on-year, fluctuating at a low level compared with historical prices, and the overall recovery in chromium prices has lagged behind other metal products. Since the beginning of 2022, due to the superposition of factors such as supply and demand mismatch, high costs, and inventory decline, chromium ore prices have risen rapidly. On May 9, the delivery price of South African chromium 44% refined powder at Shanghai Port once rose to 65 yuan/ton, which is nearly 4-year high. Since June, as the downstream terminal consumption of stainless steel continues to be weak, stainless steel plants have significantly reduced production, demand for ferrochromium has weakened, market oversupply has intensified, willingness to purchase chromium ore raw materials has been low, and chromium ore prices have fallen rapidly.