Ferro-chrome benchmark canceled after becoming ‘less relevant’ – Merafe

Merafe, a leading producer of ferro-chrome through its joint venture with Glencore in South Africa, announced on Monday via the Johannesburg Stock Exchange (JSE) that the European benchmark (EUBM) will be discontinued from June 2024.

The news rocked the ferro-chrome market, which has largely relied on the benchmark system for decades.

“Over time, the EUBM pricing system became less relevant for market participants, including larger European customers and, as a result, a decision was made to cease the EUBM system,” a Merafe spokesman told Fastmarkets.

“Given the decrease in market relevancy of the EUBM pricing mechanism, the decision to cease the EUBM price was made after a thorough review,” the spokesman added.

The benchmark was settled every quarter by a leading South African ferro-chrome supplier and a major European stainless steel mill before being announced on the JSE.

The negotiating partners of the past decade were Glencore on the sell side and Aperam on the buy side, but Samancor and thyssenkrupp have also taken turns as negotiators.

There have been persistent questions over the future of the benchmark for more than a decade, with market participants regularly predicting its imminent demise, only to be proved wrong.

When calling for an updated system for ferro-chrome prices, market participants have cited the growing influence of China on ferro-chrome pricing, the gap between benchmark and spot prices and the complicated system of negotiating discounts against the benchmark.

All these factors led to growing concerns in corporate boardrooms around the opacity and complexity of a dominant system that was described as “hard to explain.”

Nonetheless, most market participants were taken by surprise by the sudden official announcement of the “end of an era” on Monday morning – even though the move seemed inevitable.

“It’s a long [overdue] move,” a chrome industry veteran told Fastmarkets. “It’s been a significant factor for the decades since I have been in the industry – RIP EQB.” 

Fastmarkets publishes a weekly calculation of its ferro-chrome lumpy Cr benchmark indicator, charge basis 52% (and high carbon), Europe, with its most recent calculation on Tuesday May 14 at $1.43 per lb.

The indicator is calculated using Fastmarkets’ weekly price assessments for ferro-chrome 50% Cr import, cif main Chinese ports and ferro-chrome high carbon 6-8.5% C, basis 60-64.9% Cr, max 3% Si, cif Europe.

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