Glencore spent most of this week telling everyone within listening range the third-quarter benchmark price would be between $1.30-1.35 per lb (I thought price signaling was illegal, at least in the US). Still the question remains WHY $1.30-1.35 instead of lower?
It’s not like the South African rand is soaring against the dollar but instead the dollar is strong against virtually every currency. Stainless business outside the US is lackluster and ferrochrome supplies are plentiful, and finally it’s the normally slow third quarter.
The easy explanation is that Glencore wants to get off the roller coaster it started with one quarter pushing prices substantially up and then dropping it steeply in the next quarter. This system wrecked the mills surcharges and stopped consumers from ordering in the belief that the next quarter’s prices would be much lower.
One buyer said Glencore was punishing consumers twice, one for putting the price too high in the second quarter and not lowering it enough in the third quarter.
The only other explanation is that Chinese prices are up. Really?
While some people are touting UG2 prices in China at around $220 per mt, sellers say they are lucky to get any bites at $205. “I just don’t know where these prices are coming from,” one seller said. “The ferrochrome smelters are cutting back for environmental inspections and not taking any chrome ore plus ‘official’ Chinese ore stocks at ports are over 3-million mt. If you count the material in bonded warehouses, Chinese stocks are probably over 3.5-million mt.”
One seller said his fear is ore buyers trying to renegotiate the prices down, not up.
As for higher charge chrome prices, most of the reported sales are for very small tonnages that aren’t really representative. The real price will happen next week when the Chinese stainless mills announce their July ferrochrome buying prices.