London-based Roskill Information Services has published The Economics of Chromium (11th Edition), which forecasts higher demand for the commodity in 2010.
Demand for ferrochrome declined by 3.6% last year, and Roskill forecasts that this year demand will fall by 24% year-on-year, but a recovery could begin in the fourth quarter on the back of an improved global economy.
For the ten months to May, export prices for ferrochrome crashed by 68% as demand from stainless steel producers collapsed. In response, ferrochrome producers cut production, in some cases ceasing operations.
In the first quarter, about 70% of world ferrochrome capacity was taken off-line. For example, Samancor Chrome suspended all production, while the Xstrata-Merafe joint venture has been operating at a 20% capacity since December.
The stainless steel market is key to chrome demand. Stainless steel production fell by 7% last year, and is anticipated to decline by 13% this year. A recovery is expected to start in the fourth quarter.
Demand for chrome chemicals, used chiefly for leather tanning and metal finishing, has been declining in recent years on environmental concerns. Demand last year was 680,000 sodium dichromate equivalent, and is expected to increase by 2.5-3% a year over the next five years.
A third demand segment is chrome metal for superalloys in aviation, last year accounting for 40,000 tonnes chrome. Demand is projected to decline next year, with growth returning in 2011.
Ferrochrome prices were around US69¢ per lb. in the second quarter, about 70% lower than the US$2.13 peak in July last year. Prices for chromite ore have fallen by 73% to US$140 per tonne from the US$520 peak in July last year. Prices for chrome chemicals and chrome metal have fallen by about 45%.
Ferrochrome prices are forecast to average US77-80¢ per lb. this year, starting to pick up in the fourth quarter. Average chromite ore price are forecast at US$135 per tonne, with a potential increase of 20-30% next year.
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