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Japanese buyers base 2017 ferrochrome contracts on European benchmark

Tokyo — Two Japanese buyers of high-carbon ferrochrome and a producer have agreed to base 2017 annual contracts on the quarterly European benchmark index, minus a discount rate set for the full year, company officials said Friday.

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The contracts are for over 1,000 mt/month of high-carbon ferrochrome lumps sized 10-50 mm, minimum 60% chrome, maximum 8% carbon, 0.3-0.4% silicon, 0.03% phosphorous and 0.05% sulfur.

The 2017 discount rates have been set lower than for 2016, the buyers said, declining to elaborate.

"The rates have decreased, but the discounts are there," said one buyer.

Japanese steelmakers typically base term contracts on quarterly prices negotiated between an unnamed producer and Nippon Steel & Sumikin Stainless Steel Corp., Japan's largest steelmaker.

The buyer, who sources lumps from four to five producers using formulas based on various indices, said there had been no switch from one formula to another.

The second buyer said there had been a switch, but did not elaborate. The European benchmark is negotiated between Glencore and European stainless steel makers every quarter for South African ferrochrome, also called charge chrome, which has 10-150 mm lumps, minimum 50% chrome and maximum 8% carbon.

The use of the European benchmark as a pricing basis for term contracts is spreading in Asia.

An Indian producer said he was in negotiation with two Chinese stainless steel makers for 2017 term contracts, for over 5,000 mt/month, based on the European benchmark rather than the monthly Chinese domestic ferrochrome purchase prices of major mills BaoSteel, Taiyuan and Tsingshan.

Chinese mills typically seek from Indian producers material with 10-150 mm lumps, 58% chrome, maximum 8% carbon and 0.5% silicon.

Domestic Chinese ferrochrome typically has a lower chrome content of less than 55%.

A second Indian producer said it was unusual for Chinese steelmakers to seek contracts running for up to a year, and in the past term contracts with Chinese mills had been fixed quarterly.

--Mayumi Watanabe,
--Edited by Wendy Wells,