Merafe Resources published a US$1.80/lb Cr price for the Q3 2022 European ferrochrome benchmark, dropping 16.7% compared to the Q2 price of US$2.16/lb Cr.

Merafe Resources is the chromium joint-venture partner of Glencore (Glencore-Merafe), which operates the largest capacity of ferrochrome furnaces globally. All of its ferrochrome capacity is located in South Africa and despite owning the largest capacity by volume, by suspending several furnaces the company has ceded its leading producer position to Samancor Chrome – also operating ferrochrome furnaces in South Africa.

The European ferrochrome benchmark price is set in advance on a quarterly basis and is used by stainless steel producers in alloy surcharge calculations. The quarterly price bottomed out at US$1.01/lb Cr just before the COVID-19 pandemic broke out, underpinned by a structural oversupply of ores and ferrochrome leading into 2020. COVID-19 had a limited impact on prices over 2020, as prices had already reached their floor owing to operating costs and plants were facing challenging conditions to remain operational in 2019. As markets recovered in 2021 and supply started to lag demand, prices began to soar again and reached US$1.80/lb Cr in Q4 2021. The price increase was buoyed by rising reductants, energy and logistics costs and peaked last quarter (Q2 2022) at US$2.16/lb Cr.

Against a backdrop of a gloomy global economic outlook and “zero-COVID” policy lockdowns in China restricting recovery, demand has softened. Despite the slowdown in demand, Project Blue forecasts the ferrochrome and chromite ore market to remain tight for 2022, which will see a tug-of-war between downstream sentiment and high costs.