Bearish market conditions since last year in consuming
markets and supply uncertainty in South Africa have affected
trading patterns and foundry-grade chromite prices over the
past six months.
The persistent weak performance of the chrome market in 2019
– including both metallurgical and non-metallurgical
grades – caused prices for foundry sand to halve in
the space of 12 months. However, the Covid-19 outbreak broke
the downward trend in the foundry-grade chromite market at the
end of April, following the announcement of another 14-day
lockdown in South Africa – following on from the
initial 21-day lockdown announced on March 26.
Price rises – albeit from a low level and at a
gradual rate – and supply uncertainty followed the
announcement, resulting in shifting trading patterns and
liquidity changes in the chromite foundry markets. By the
middle of April, prices of foundry sand had dropped by $10-20
per tonne from the start of the year. And even though prices
then recovered slightly because of supply issues in South
Africa, this upturn was capped by a lack of demand in most
Fastmarkets' price assessment for chromite, foundry, 46%
Cr2O3 min, wet bulk, fob South Africa was $210-230 per tonne on
June 30, having been flat for three consecutive price
assessment periods after rising from $180-210 per tonne on
The price assessment for chromite, foundry, 46% Cr2O3 min,
dried and bagged, fob South Africa remained unchanged for the
second trading period on June 30 at $285-395 per tonne, after
ticking up from $250-380 per tonne on April 14.
Shifting trading pattern
One shift in trading patterns over recent months has been the
change to a reduction in shipments of wet bulk material
straight to China, in sharp contrast with the trend for
increasing shipments direct to China at the end of 2019 and at
the start of 2020.
Foundry factories in China tend to source foundry sand
domestically from washing and screening factories, which
usually buy the metallurgical material at 44% grades with the
AFS value at 70-90. Almost 70% of the foundry grade wet bulk
material used in China is sourced within the country, according
to market sources.
Under normal circumstances, China is a medium-sized importer
of foundry sand from South Africa, with emerging trade flows to
China at the end of 2019. This was mainly caused by bearish
market conditions eating up the marginal profits of the washing
factories and leading to some closures or suspensions.
However, price increases for wet bulk foundry sand from the
end of April might lead to a decline in trade flowing direct
from South Africa to China. "For screening factories to
maintain profit margins, the minimum spread between the price
of the material from South Africa and the domestically
processed foundry sand should be at least 600 yuan ($83) per
tonne. Otherwise, it becomes more economical to source the
material directly from South Africa," a trader in China told
But despite the advantage of the very high yield rate of at
least 85% for the South African foundry sand, the increasing
prices, supported by uncertainty over the pandemic, might put
off Chinese buyers, who would prefer some off-spec material for
further screening given the bearish market.
"Suppose the price of the South Africa wet bulk foundry sand
was at $210 fob South Africa per tonne for the Chinese market
and the freight rates was $20 per tonne, giving us a cif China
price roughly at $230 per tonne. By comparing the domestic
foundry sand price at 2,100 yuan ($297) per tonne, we may find
the spread of $67 per tonne would not be enough [for traders]
to buy the material because of the weak downstream foundry
sector," a second trader in China said.
Aside from the question of price spread, there is buyer
sentiment to take into consideration.
The lockdown extension in South Africa in the middle of
April resulted in panic among buyers of foundry sand in China.
But after an initial flurry of buying activity, they factored
in the bearish market, so buying activity began to fall after
that, according to the first trader.
"Normally, foundry factories would source material on a
'hand-to-mouth’ basis. But with the lockdown and
halted operations in South Africa, and the delayed restart to
operations in China in February, many downstream users
stockpiled material in April [to last] for at least two or
three months, leading to a sharp decline in demand for the
foundry sand in May and June," he said.
According to a third trader of foundry sand, downstream
demand in May and June fell by a half. But by July, most
clients might be back to their previous buying pattern, leaving
the market expecting a slow flow of foundry sand material, he
Market participants in China believe the foundry-grade
materials market has reached a peak – at least in the
short term. "The foundry sand market in China could be said to
be balanced, with concern over the supply of raw materials
being offset by lukewarm downstream demand," a fourth trader of
foundry grade chromite told Fastmarkets.
"I’d describe the current market conditions as
being in a 'plateau period’, with prices staying
firm and lacking incentive for either upward or downward
movement – and that might sustain for the following
two months," a fifth trader in China said.
"By the end of July, there would be about 50,000-60,000
tonnes of material arriving [from orders delayed due to the
pandemic]. Given that the maximum consumption in the domestic
market is about 20,000 tonnes, the supply would be enough to
support production for at least three months."
"There is too much uncertainty in the South African
situation. We think it is wise to stay on the sidelines, with a
conservative view on near-term developments," a sixth trader