Watch out a new major low-carbon ferrochrome player is ready to step on stage in the US. EtiKrom’s Robert Yildirim recently struck deal with Kluchevsky’s owners under which EtiKrom would continue to supply the Russian chrome metal producer and ultra low-carbon ferrochrome producer with feed (ferrochromium silicon). In return for feed, EtiKrom received a seven-year marketing contract with an option for another seven years. Kluchevsky can continue to sell in Russia, but if Russian bound material is sold outside of the country EtiKrom will IMMEDIATELY suspend feed shipments to the plant. That is important since Kluchevsky was known for “leakage” when prices were favorable.
EtiKrom has much bigger plans for Kluchevsky and other chrome alloys. The Turkish company has just signed a three-year low-carbon supply agreement with a major US mill for a minimum of 3,000 mtpy using the Russian material. While the mill usually buys 0.15% C low-carbon, Kluchevsky, via EtiKrom, will supply a much higher quality low carbon, probably between 0.05-0.06% C.
Insiders say it is cheaper for Kluchevsky to produce the 0.05% C material than trying to debase it to 0.10% C or 0.15% C. EtiKrom also has a history of buying DLA high-carbon ferrochrome through an agent and can easily start bidding for the 0.15% C grade or better once the agency starts selling the better grades.
As for price, it will be sold at a discount, probably around 10%, which is higher than the 4-5% discounts for 0.10% C material generally found in today’s market.
“It makes sense for EtiKrom since that is the ONLY way it could penetrate the US market,” one competitor acknowledged. “It couldn’t just match the discounts now in the market.” And look for long-term deals.
However, insiders say once it establishes itself as a steady supplier, the discounts will be more in line with the market.
As for the ultra low carbon (below 0.05% C) there isn’t much of a market for that and all the major consumers are tied up.
Eventually, EtiKrom will probably adopt a low-carbon sales strategy close its high-carbon sales policy (80% long-term and 20% spot, depending on market conditions).
EtiKrom isn’t going to stop there and is in the market for other chrome properties. The company was close to buying EWW from Afarak but Afarak reportedly pulled back. However, that might change if Afarak needs to buy out the minority shareholders.
As for Kluchevsky, it is still reportedly entangled in a dispute with F.W. Winter that dates back to 2013. Kluchevsky bought an interest in F.W. Winter (thought to be around 25%) with a marketing agreement. However, bad blood ensued and Kluchevsky reportedly feels there were unauthorized withdrawals made without its approval.