The LME is studying a proposal to introduce a ferrochrome contract. This isn’t the first time that this has been proposed but with the general dissatisfaction with the quarterly benchmark price it may be the right time. Everyone knows that ferrochrome pricing is a mess, and the ONLY accurate price is the monthly tenders by Chinese stainless mills. Every other price has been manipulated beyond recognition.
However, and it is a big BIG however, there are lots of problems. In the past, the split between charge chrome and high-carbon ferrochrome suppliers was too great. The high-carbon producers always felt that they had a premium product. There are ways to get around this by having the contract based on contained chrome units instead of just a specific grade.
There is also the question on whether the Chinese stainless mills, the largest ferrochrome users, would warm to the new system. The stainless mills evaded the LME nickel contract by using Asian nickel-pig iron instead.
And, there is the question if the LME is the right venue. The exchange’s two recent foray’s into ferroalloys, a molybdenum and cobalt, has been a failure. Virtually all the market participants have ignored the contracts. On the plus side, the LME’s nickel contract was a winner.
There is a lot to work out that at least there is movement away from the benchmark system.