Oman has an obvious advantage on export prices of LC ferrochrome
----Interview with Zengguan Li
President
Star River General Trading (FZC) LLC
With an annual capacity of 16,800 tons of LC ferrochrome, Star River GeneralTrading (FZC) LLC has two 3,600Kva refined furnaces in Oman, mainly producingLC ferrochrome V10(Cr60%min C0.1%max) and V6(Cr60%min C0.06%max). The companymainly sells LC ferrochrome to Japan, South Korea and Taiwan, China, as well asthe United States, and would expand European customers later.
Asian Metal: Hello Mr. Li, welcome to the interview by Asian Metal. Please briefly introduce your company and its main business.
Mr. Li: Our company started construction of two 3,600kVA refined furnaces in Oman in early 2021 with an annual production capacity of 16,800 tons. We mainly produce LC ferrochrome V10 (Cr60%min C0.1%max) and V6 (Cr60%min C0.06%max). However, due to the shortage of materials during the epidemic, our company put only one furnace into operation in February 2024, with a monthly output of nearly 600 tons.
Asian Metal: When would the other refined furnace be put into operation?
Mr. Li: Our company originally planned to put another furnace into operation in May, but because of the war in the Middle East, the ocean freight rose sharply from USD1,000 per container to the current USD3,500, so the refractory bricks have not been in place. The other furnace is scheduled to be put into production at the end of August, when we would produce nearly 1,200 tons per month.
Asian Metal: How is the quality of Omani chrome ore? How about the production cost compared with that in China?
Mr. Li: Due to rental, ocean freight, labor costs and other reasons, the cost of producing LC ferrochrome in Oman is higher than that in China. Although there are chromium ore resources in Oman, the grade is about 28-32%min. If we need high-grade raw material, we need to import. We produce chrome silicon in China and ship to Oman. The prices of ramming materials in China is RMB2,300/t (USD317/t), adding ocean freight of USD130/t, the import cost is close to RMB3,300/t (USD455/t), and with customs clearance and other miscellaneous taxes, the cost of auxiliary materials is nearly 1/3 higher than that in China. The price of electricity in Oman is usually higher than RMB0.5/kW·h (USD0.07/kW·h), and the price is higher than RMB0.5/kW·h (USD0.06/kW·h) in winter. The technical workers are mainly hired in China, and the salary is doubled to RMB15,000/t (USD2,066/t) compared with China.
Asian Metal: Since the production cost is much higher, why do you decide to produce LC Ferrochrome in Oman?
Mr. Li: The most competitive prices of LC ferrochrome in the world come from India, though the quality is not high. So originally an Indian company built the factory here in Oman. The construction was completed in October 2023 and was put on the schedule to start operation. According to their plan, they planned to purchase silicon chromium from our company in China, but later the Indian changed their minds and leased the factory to us. One reason is that the production technology is not mature, the other reason is the hot weather. The current local temperature is close to 45°C, and employees must take a two-hour break at noon. But even so, our company still decided to take over the company to produce LC ferrochrome in Oman because it has an obvious export price advantage so that we can better explore the European market. Besides, the local society and political situation is stable. At present, we are the only company producing LC ferrochrome in Oman.
Asian Metal: What is the current export price of LC ferrochrome in Oman? How do you see the price trend of LC ferrochrome in the second half of 2024?
Mr. Li: The current export price of V10 is USD1.98/lb Cr FOB Oman, and the price is about USD2.15/lb Cr FOB China. Omani government only charges a marketing tax of 5%, while China's LC ferrochrome export tariff is 40%. Due to the impact of the international war, the global demand for LC ferrochrome is weak, but the prices of chromium ore are firm, so the overall prices of LC ferrochrome would stand firm in the second half of the year.
Asian Metal: How do you see chromium ore prices in the second half of 2024?
Mr. Li: In the first half of 2024, the prices of chromium ore have risen by RMB8-10/dmtu (USD1.1-1.38/dmtu). However, ferrochrome prices are difficult to rise due to weak demand. With shrunken profits of smelter, it is expected that the prices of chromium ore would stay steady on the whole firm in the second half of 2024.
Asian Metal: At present, which countries do your main customers come from? What is your sales plan in the second half of 2024?
Mr. Li: At present, the main customers of our company are from Japan, South Korea and Taiwan, China, and we also have some customers in the United States. Due to the unstable Red Sea situation, the freight to Europe is high, we do not have customers in Europe at present. But we target at the European market and we would endeavor to explore clients in Europe later. We hope to get to know more customers through the Asian Metal platform.
Asian Metal: Thank you for your wonderful sharing. We wish your company a thriving business.
