Reuters reported that stainless steel producer Aperam has halted further operations, suspending its eastern Belgian plant, which has access to wind and solar renewable energy.

Energy crisis in Europe is now a common theme as we head into the northern hemisphere winter. Energy-intensive industries such as those using electric arc furnaces to smelt metals are reporting increasing suspensions of operations. Looking at the stainless steel industry, what does this mean for ferrochrome?

The EU’s stainless steel industry has seen its ratio of imported ferrochrome consumption decline over the last decade. This is not only related to a steady decline in demand as stainless steel production has dropped by around 500kt since 2010, but also improving scrap consumption (above 60% in EU stainless steel plants) as well as higher ferrochrome production in Sweden (Yildirim’s Vargön Alloys plant) and Finland (Outokumpu’s Tornio plant). Nevertheless, about 50% of the EU’s ferrochrome requirements are still met by imports.

South Africa is the main source of ferrochrome, accounting for 65% of imports since 2010, however, dropping from close to 1Mt to less than 400ktpy since 2019. Nearly 15% of ferrochrome imports were sourced from Russia and Kazakhstan in 2021, with the balance from nearly every other key source of ferrochrome.

South African ferrochrome producers enjoyed a buoyed price in H1 2022, which for a short period spelt an opportunity for local plants to survive their eroding position on the global industry cost curve, even with hints of long-idled plants restarting. But with energy woes in Europe set to cut requirements from South Africa further, and a bleak economic period in China leading to oversupply, there is little support for prices over the near term to cover high logistic costs to get materials to market. While bearish sentiment endures, Project Blue data shows that the chromium market is set to become the largest of the ferroalloy markets over the energy transition period, with diverging trends for the overall steel industry versus its niche stainless applications.