After long run discussions, the benchmark for the charge chrome shipments from South Africa to Europe during the fourth quarter of 2011 was finally agreed as unchanged at USD 120 per pound. The proposal by a major supplier to raise it by USD 5 per pound was turned down by the consumers, the stainless mills.

South African ferrochrome producers had been for a while troubled by strong Rand caused by a large inflow of speculative funds to buy the currency because of the country's abundant mineral resources.

However, as the financial crisis in Europe became gradually serious, during which speculators withdrew their funds from Rand, the South African currency started to weaken around mid September, when the benchmark negotiations were about to enter a finalizing stage. Rand once fell by 14% in September, which definitely helped the South African ferrochrome producers to improve profitability.

Currency had been an issue not to be officially adopted for discussion in the benchmark talks and so was it this time. However, it is believed that the weaker Rand did influence the buyers' attitude.

As a result of the weaker Rand, there have been concerns in the market that South African producers, by taking this opportunity of the improved profitability, may be encouraged to decide ferrochrome (charge chrome) expansions in the near future, even from the Q4 2011, which will affect next year's supply demand situation, and increase uncertainty.

In Europe, the benchmark price, widely away from the actual price in the market by now, has been regarded as a kind of nominal one. Major European mills had apparently finalized most of their Q4 purchases of ferrochrome (including charge chrome) before the benchmark was agreed. As to the Q3 2011 (July to September) benchmark price, a mandate of buyers' decision making was unusually given to Japan.

Nevertheless, ferrochrome benchmark price is still indispensably important, as one of the major parameters to determine the price of stainless steel products for export in long term supply contracts.

(Sourced from TEX Report Limited)