NSSC, Xstrata Agree to Cut FeCr Price Marginally in January-March

Nippon Steel & Sumikin Stainless Steel (NSSC) agreed with Xstrata by Monday to reduce ferrochrome purchase price by 1.8% for January-March from October-December. NSSC followed settlement in Europe last week. The price was settled materially to keep the level under major stainless production cut in Europe while the suppliers in South Africa sought higher price to cover higher cost. Ferrochrome price is expected to be strong when South African electricity cost will increase widely in April.

The new price is CIF Japan 109 US cents per pound of chrome, which represents around US$ 1,250 per tonne for ferrochrome with 52% of chrome. The price is 2 US cents lower than the price in October-December, which is first drop in 3 quarters after 20 US cents hike in July-September and 14 US cents hike in October-December.

Xstrata’s plant and other makers in South Africa experienced 31% higher electricity price since May while they suffer from higher rand rate against US dollar. The suppliers sought additional hike to cover higher cost, which was partly covered through hike in October-December. However, they abandoned the hike when European stainless makers reduce the production widely to adjust the inventory toward end of fiscal year.

South African electricity cost is expected to increase by 35% in April 2010 when the power suppliers try to cover investment cost for power supply expansion. The higher electricity cost could reduce the ferrochrome makers’ profit. The ferrochrome suppliers could seek higher ferrochrome price strongly after they decided to find the timing for price hike as soon as sign for stainless demand recovery.

The ferrochrome price down represents around US$ 8 per tonne of lower price for stainless steel with 18% chrome. The impact is much less than around US$ 56 cost up in October-December and US$ 70 cost up in July-September.