The price of ferrochrome
Regarding the price of ferrochrome, our previous article discussed the composition of its cost, such as the cost of chrome ore accounts for 60% of the total cost, and other costs (including electricity, transportation, and other material costs) account for the remaining 40%. So today we will discuss the calculation of ferrochrome price and the impact of macroeconomic level on the price of iron.
About the calculation of ferrochrome price
The calculation of ferrochrome prices is generally different from other types of ferroalloys. General types of ferroalloys are measured in tons and quoted in tons, but ferrochrome prices are generally quoted in LB/CR, which is the price per pound per chromium.
And the basis of quotation is based on the minimum content of chromium, for example, 60 base price means that the chromium content of this batch reaches more than 60%, and similarly 65 base price means that the chromium content reaches more than 65%, and the price per ton calculated from different base prices is different, and the following examples will be given.
Example 1: 2.31LB/CR (60 base price), then the ton price is 2.31*2204*0.6=3054
Example 2: 2.36LB/CR (65 base price), then the ton price is 2.36*2204*0.65=3381
The above example shows very well how ferrochrome is calculated, which is basically based on the price per pound of chromium multiplied by 2204 (the multiplier of tons and pounds) multiplied by the base price.
Macroeconomic impact on ferrochrome prices
Regarding foreign countries, the main concern is actually the Federal Reserve. The current strong U.S. job market has further boosted the final interest rate expected from the U.S. rate hike. If the original final interest rate was about 4%, in order to address the problem of inflation, then because the employment data is very good, the willingness of Americans to spend remains strong, thanks to the previous unlimited quantitative easing in the United States, which led to an insane increase in the price of consumer goods, rent prices in the United States.
Coupled with the reduction in unemployment, the current situation is not in line with the Fed’s expectations, so the original March rate hike of 25 basis points is likely to be revised upward to 50 basis points. The rate hike means that the dollar will continue to remain strong, and with it, the future plunge in commodity prices, which will of course also affect the market for ferroalloys. If the terminal interest rate reaches 5%-6% as expected by the U.S. financial institutions, and the high-interest rate is maintained for a relatively long time to deal with inflation, then it is easy to cause the economic collapse of some third-world countries, Europe is under pressure, and by the same token, China will also suffer more serious pressure.
The conclusion is that the current rise in ferrochrome prices is unsustainable, although the appreciation of the dollar led to the depreciation of the yuan, resulting in favorable to China’s exports, but due to the weakness of the demand side will lead to supply exceeding demand, and will remain for a long time.