Merafe announced that their quarterly, forward-looking European ferrochrome benchmark (52%, DLV EU) price will be discontinued, effective June 2024.

The European ferrochrome benchmark has been published for almost two decades, reporting quarterly negotiated prices between the South African ferrochrome supplier and European stainless steel producers. The benchmark, while discounted against for some time already, is an important part of the alloy surcharge calculation, an instrument put in place to pass on changes in alloy costs along the value chain in the stainless steel industry.

Historically, the benchmark has recorded a ~10% premium to reported European spot prices for high-carbon ferrochrome. Since 2019, the European spot market prices decoupled from the benchmark and trended towards the Chinese ferrochrome tender prices. While originally setting global ferrochrome trends, the benchmark has increasingly trailed trends in China.

The European energy crisis following the Russian-Ukraine conflict exacerbated the decoupling of the benchmark further. Project Blue understands, that over the past year, the Glencore-Merafe JV has remained largely absent from the European spot market and production from the JV recorded a 22% decrease in HC FeCr in 2023.

With the European benchmark no longer setting the measure for the market, it leads to the question of how the European ferrochrome market will be priced, with Fastmarkets’ recent launch of an EU index (Cr 47 – 56%, DLV EU) a timely arrival. This is not just true for Europe, as several other supply chains such as in Japan have settled contracts against the benchmark. The Chinese tender price is already largely seen as the trend setter for the market and with the big three (Glencore-Merafe, Samancor and ERG) on track to be surpassed by Xin Ganglian in 2024, Project Blue expects the tender price to become even more central to future price negotiations.