Chrome chemical factories reopen but coronavirus outbreak could hit chromite demand

By Sybil Pan
Published: Wednesday, 19 February 2020

Chrome factories in China's Hubei and Sichuan provinces have gradually returned to operation since February 10 but demand for chemical-grade chromite will be hit been hit by the coronavirus outbreak, market sources warned.

Most chemical factories have been closed for the Chinese New Year break, which was intended to end by January 31. But the outbreak of the novel coronavirus (2019-nCoV) in China forced authorities in these two provinces to extend the holiday to February 9 to prevent the spread of infection.

By February 10, many chemical works for the production of chromium salts had restarted. But border closures, disrupted transport and delayed downstream operations will continue to weigh on demand for chemical-grade chromite.

"Our factory was not shut down during the holiday [so employees did not leave the city] and therefore was able to continue operation despite the outbreak," a first chromium salts producer in China said.

"Meanwhile, we have enough chromite raw material for production until the end of the first quarter but delayed operation in the downstream sector, as well as the limited logistics, indicates that we need to adjust our production," he added.

According to market participants, transport within the city can continue as long as factories have a government-issued permit to restart operations.

But in terms of cross-border transport, there remain risks of being not allowed to get exit highways or circumvent roadblocks, which has resulted in logistics operators capping orders. This is caused inventories at chromium salt producers to increase, according to a trader of chemical-grade chromite in Tianjin City.

As well, at some factories only a single production line has restarted to lower of risk of infection by the coronavirus.

"Being close to the port indicates that we have no problem in transporting the raw material but the concern is about logistics," a second chromium salt producer in China said. "Even if we got the permit for cross-provincial transport to deliver our products, it is difficult to find drivers and trucks, which means we have to store the products and increase our inventory."

Any improvement depends on whether the spread of the virus can be contained, a third chromium salts producer told Fastmarkets, adding that he would like to take a long position for as long as the price of chemical-grade chromite is favorable.

The price of chromite, chemical, 46% Cr2O3 min, wet bulk, fob South Africa was at $160-200 per tonne, according to the latest Fastmarkets assessment on Tuesday February 18, with confirmed deals done to China at the lower end.

For foundry factories in the northeastern part of China, the picture was similar to the south. Traders of foundry grade chromite told Fastmarkets of their concerns about the disrupted logistics and a shortage of drivers to deliver their finished products to downstream consumers.

"There is demand from downstream clients now. But we cannot deliver the finished products. Beside a shortage of drivers and trucks, there are some provinces, like Jiangsu, that will not allow any vehicles with license plates of other provinces to enter as a measure to block any possible infection," a foundry grade chromite trader in Dalian City said

"What we can do at the moment is produce the finished products with existing raw material so that, when the epidemic is under control, we can guarantee the supply for our clients," a second trader of foundry-grade material in Dalian told Fastmarkets.

Amid the uncertainty brought about by the coronavirus outbreak, Fastmarkets’ February 13 assessment of chromite, foundry, 46% Cr2O3 min, wet bulk, fob South Africa was an unchanged $190-220 per tonne.

On the same day, the price of chromite, foundry, 46% Cr2O3 min, dried and bagged, fob South Africa was $260-380 per tonne, flat for a third consecutive week.



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