Ferrochrome markets are firmly in oversupply territory as Chinese domestic production hits record levels while stainless steel demand enters its seasonal lull. High-carbon ferrochrome in Inner Mongolia sits at 8,000-8,150 RMB per metric ton (50% Cr content), down roughly 25 RMB week-on-week. Prices in East China range from 8,350-8,450 RMB/t, with Kazakhstan material holding steady at 9,500-9,600 RMB/t.
The production data is stark. China's high-carbon ferrochrome output averaged 900,200 metric tons per month in H1 2026, up 36.8% year-on-year. That is near historical highs. Combined with weak import demand — May imports of 131,000 tons, down 15.6% year-on-year — the domestic market is awash in material. Steel mill tender expectations for the next month sit around 8,220 RMB/t with a bearish bias.
Production costs are providing a fragile floor. SMM data shows Inner Mongolian production costs at 7,809-7,855 RMB/mt, while Sichuan costs run 7,937-7,983 RMB/mt. At current prices of 8,000-8,150 RMB/t, many Chinese smelters are operating at or near breakeven. Costs rose slightly week-on-week as chrome ore prices rebounded modestly, with 40-42% South African concentrates at 53-54 RMB per metric ton unit at Tianjin port, up 0.5 RMB week-on-week.
South Africa remains a wild card. H1 2026 chrome ore exports to China reached 8.96 million tons, up 29.9% year-on-year, representing nearly 80% of all Chinese chrome ore imports. The surge is driven by South African ferrochrome restarts remaining slow — local chrome ore absorption capacity remains weak, so mines are aggressively exporting. SA ferrochrome output could come in at 1.0-1.5 million tons for 2026, down sharply from pre-2024 levels.
The power tariff story for South Africa has shifted. The regulator approved a 35% electricity tariff reduction for Glencore and Samancor in January 2026, lowering production costs and potentially encouraging some capacity recovery. But H1 2026 restarts have been described as 'slow,' suggesting the structural damage from years of power shortages and cost inflation will take time to reverse.
Stainless steel demand — the primary consumer of ferrochrome — is in its seasonal off-season. Chinese stainless mills have been implementing production cuts and maintenance, adopting hand-to-mouth procurement strategies for both ferrochrome and chrome ore. This demand weakness is the primary driver of the current oversupply. Medium-term demand remains structurally positive, with the global ferrochrome market projected to grow at a 6.1% CAGR through 2033.
The bull case: chrome ore cost floor holds, and a stainless demand recovery in Q4 2026 absorbs excess FeCr inventory. Any South African power or logistics disruption would squeeze ore supply and lift FeCr prices. The bear case: Chinese production remains elevated, stainless cuts deepen, and the market drifts further into oversupply, pushing FeCr below breakeven and forcing production cuts.
This is a clear buyer's market for ferrochrome, but the floor is within sight. Current pricing near breakeven means the downside is limited — further declines would trigger production cuts, which would quickly rebalance the market. For H2 2026 procurement: cover near-term needs on a hand-to-mouth basis through Q3 while stainless demand is soft. For Q4 and Q1 2027, consider covering 50-60% of volume if suppliers offer at or below current levels, as the risk of an upside correction when stainless demand returns is meaningful. Chrome ore buyers should note that SA ore supply remains abundant, but the cost floor around 50-55 RMB/mtu for SA concentrates limits further downside. Avoid building large ore inventories — the hand-to-mouth strategy of Chinese smelters is rational here.