Participants active in the foundry grade chromite sector have
suggested that the market may be experiencing a change in
direction, with supply reacting to meet demand after a year
of shortages and rising prices.
In conversation with Fastmarkets at the ICDA Chromium 2018
conference in Baotou, China, on November 6-8, market
participants in the foundry sand business spoke of a
near-record year for prices and demand.
After extremely firm conditions in 2017 when foundry sand
prices held steady above $350 per tonne, the start of 2018
ignited what turned out to be a surge in market prices.
In the first half of the year, foundry prices rose by more
than $100 per tonne, with the price of wet bulk 46% foundry
grade chromite hitting a high of $545-565 per tonne fob South
Africa late in June, up from $400-450 per tonne in January - a
rise of 30.6%.
What the industry experienced then was a combination of
strong demand across the board from both core and peripheral
markets that was underpinned by strong fundamentals in
consuming markets such as the industrial, refractories and
The high demand added to an underlying situation of shortage
of material. During the latest market downturn in 2015 and
early 2016, several producers that were operating underground
mines in South Africa closed, dogged by depressed prices and
This took a substantial chunk of foundry sand supply out of
the market and created a gap that has never really been
The supply/demand balance was steady for some time since
but, with the widespread demand increase in 2018, the earlier
shortage became apparent, triggering the price rise.
While a bullish tendency was clearly evident in the wet bulk
market, the price of dried and bagged foundry sand was even
more volatile during this period. This was due to the different
nature of the two markets - while wet bulk material trades to a
limited number of customers, buying large tonnages of several
thousand tonnes per parcel, dried and bagged material is bought
by hundreds of end-users in small parcel sizes of 100-200
In an appreciating market, the dried and bagged price is
thus more likely to be reactive and to experience quicker
upticks compared with the wet bulk price, which may lag
In consequence, Fastmarkets witnessed what became a gradual
and progressive separation of the dried and bagged market from
the wet bulk market.
The previously set premiums that dried and bagged would
command over wet bulk no longer applied, with premiums growing
for the dry material during the first and second quarters of
After following this pattern since late 2017, in July of
this year Fastmarkets launched a standalone dried and bagged
foundry price, to capture what had become a free-standing
market that had started to move on a separate track.
The dried and bagged foundry grade chromite price complements
the pre-existing wet bulk price.
Market on the cusp
Into the fourth quarter of 2018, early signals emerged
pointing to a softening of the market after the bullish trend
in the first part of the year.
As of mid-November, bearish sentiment is spreading, with
several sources saying that this may be only the beginning.
On the demand side, several factors were affecting orders.
Market participants in conversation with Fastmarkets pointed to
the US-China trade war; the economic slowdown in several
western countries at the end of the year; industrial activity
easing after a strong start to the year; and a slowdown in the
automotive market. All of these factors were reckoned to be
contributing to damped demand.
Meanwhile, supply has reacted to the shortage of material
and several market participants, attracted by the high pricing
scenario, sought to enter the sector.
Almost all participants involved in the market who were
canvassed by Fastmarkets agreed that additional volumes of
foundry sand were now reaching the market; some even went as
far as say that this was just the start and that "a flood of
material" could come at some point in 2019.
The shortage is receding
"The market is reaching a cusp and all the indicators point
to a change in direction in the coming months. Supply has
reacted; the shortage we saw earlier is easing. This could be
the beginning of a new phase," one participant said.
The additional volumes available were reported, for the most
part, to be off-grade material, characterized either by lower
chrome or by higher silica content or that were produced by
means other than the standard underground mine route. (Note:
Fastmarkets’ specifications for chromite sand are
46% Cr2O3 content, max 1% silica content.)
Fastmarkets has heard of some run-of-mine material being
processed or ore sourced from open-cast mines being processed
into foundry grade material.
Additionally, there was the understanding that some volumes
of foundry sand produced in China, which is produced by
screening metallurgical grade chrome, may be available for
export into western markets such as Europe. That would be a new
development China-produced material is typically consumed
domestically in its entirety.
These volumes command lower prices than standard
foundry-grade material. Still, while availability improves,
these volumes have been indirectly affecting standard foundry
prices, as indicated by the bearishness in the market over
the past month.
Fastmarkets assessed the price of foundry-grade 46%
chromite, wet bulk, at $450-490 per tonne fob South Africa on
December 11, against $540-560 per tonne in mid-September.
The price of foundry-grade 46% chromite, dried and bagged,
was assessed at $530-570 per tonne fob South Africa on
November 11, widening downward from $570-600 per tonne in the