Supply, demand dynamics trigger evolution in chromite pricing spreads
Published: Wednesday, 01 August 2018
The evolution of spreads in non-met chromite markets has caused a breakaway from the historic patterns in price differentials between grades of chemical, metallurgical and foundry material. Industrial Minerals has launched a new price assessment for dried and bagged foundry grade chromite sand to provide additional insight into market movements.
Prices in the non-metallurgical chromite market were
formerly governed by a generally accepted system of premiums
that maintained a close correlation between the various grades
in the sector.
But some markets have gradually moved away to take separate and
more independent routes.
Spreads between the main chromite grades have been changing
significantly in recent times. This evolution has affected
metallurgical chrome ore material, chemical grade and foundry
grade chromite alike.
Historically, a generally accepted set of premiums used to
distinguish the UG2 met chrome ore price from the chemical
grade and the foundry grade price.
Until 2016, these three markets were strongly connected in
price terms - chemical grade was priced around $20-30 higher
than UG2 and foundry grade some $20-40 higher than the chemical
Dried and bagged foundry chromite historically commanded a
premium of $50 to the wet bulk foundry grade price.
But much has changed over the past two years. The connection
between UG2 and foundry has fractured since 2015-16; similarly,
the link between UG2 and chemical grade has been waning. At
present, UG2 and lower-purity 43-44% chemical maintain a close
relationship, while 46% has taken an altogether separate
Ultimately, the premium system between wet bulk foundry and
dried and bagged foundry has also become looser. Owing to
widespread demand for dried and bagged material, its prices has
risen quickly this year while wet bulk has lagged behind and is
only now catching up.
Chemical grade and UG2
The spread between low and high ends of the price
range for chemical chromite 46% has also been widening as
of early March.
This split, which remains in place, reflects cheaper quotes for
the markets of China and Southeast Asia but significantly
higher prices for material traded in western destinations
including Europe and the Americas.
Meanwhile, a standoff between South African suppliers and
Chinese buyers of chemical chromite has been maintaining prices
to China at the low end.
"There is no discernible end in sight for the stalemate," one
Conversely, sellers have been able to secure higher prices by
selling to other destinations, including the United States,
Western Europe, Turkey and Russia.
A perpetuation of this pattern over the past four months has
resulted in most of the 46% chemical material trading elsewhere
other than China and South-East Asia, where sellers can achieve
Additionally, the trading of chemical-grade 46% material in
China faces strong competition from UG2 chemical material,
which has lower purity levels of 43-44%. This material is
favored in some markets in Asia over standard 46% chromite for
This supported trading of significant volumes of 43-44%
chromite into South-East Asia during the first half of the
Higher availability of this grade, compared with tight supply
of 46%, is ensuring a growing price differential between the
While Industrial Minerals does not formally assess the price of
43-44% chemical grade chromite, it understands that market
prices have moved from $230 per tonne cif China in the first
part of the year to $250 per tonne up to June before edged down
to around $220-240 per tonne as of mid-July.
Industrial Minerals’ price
assessment for chemical-grade chromite, 46% Cr2O3, wet
bulk, remained at $285-340 per tonne fob South Africa on
July 31, unchanged week on week since March 6.
The spread between the low and high ends of the pricing range
is more than $50 per tonne but historically it has been as low
as $10 per tonne.
Additionally, the spread between the 46% and 43-44% price
stands at an average of some $70 at the moment. For comparison,
this used to be closer to $40 in March 2017. Prior to that, the
premium for 46% over the lower-purity grade used to be around
This shows how, especially during 2018, there was an additional
rupture in the chemical grade chromite sector, with 46%
material prices climbing and the market epicenter moving
westwards, while 43-44% prices remained more competitive and
established a stronghold in eastern destinations.
According to multiple sources, this reflects limited production
of 46% grade - output has dropped over the past year - while
production of 43-44% has been more abundant.
Foundry: wet bulk and dried and bagged
Premiums and spreads in the foundry market have also
Industrial Minerals has been pricing the wet bulk foundry sand
market - seen as the industry benchmark for participants in the
foundry sand sector - for many years.
For dried and bagged sand, the market has historically applied
a premium of around $50 on average - covering the drying and
bagging cost plus a variable margin - to establish the
dried/bagged price, based on an original wet bulk price.
Changes in supply and demand patterns, however, have forced the
two market prices apart; this has become evident since the
second half of last year.
Owing to a rebound in demand for dried and bagged material,
supply does not cover the needs of the entire market. The rise
in demand has been supported by improvements in foundry and
refractory end markets as well as changes in trading
China formerly extracted its own foundry grade from
metallurgical grade material, for example, so it was not
particularly active in sourcing directly from South
Because local processors have been using material that is
unsuitable for foundry grade extraction, Chinese users were
forced to import foundry sand material from South Africa,
bolstering further demand.
The apparent shortage has led to an appreciation of dried and
bagged prices while wet bulk prices have lagged behind.
Margins for dried and bagged have in some cases increased by
half against what they used to be under the traditional set
Industrial Minerals assessed the price of wet
bulk foundry grade chromite 46% at $545-565 per tonne fob
South Africa on July 31, up from $400-450 per tonne in
At the same time, dried and bagged had reached $550 per tonne
fob South Africa and above by March.
"Dried and bagged has been so much more bullish than wet bulk
so suppliers focused on that. It appreciated more quickly, due
to smaller parcel sizes and large number of end users. And the
link with the wet bulk market gave in," a seller said.
After closely following the progress of the two markets, Industrial Minerals has launched a separate
assessment price for the dried and bagged foundry grade
chromite sand to capture the movement of this specific
The new price can be found in the price book under the
following name: Chromite, foundry, 46% Cr2O3, dried and
bagged, FOB South Africa $/tonne.
Industrial Minerals assessed this price on Tuesday July 31 at
$600-625 per tonne fob South Africa.