Members Area
T: +44 (0)114 551 8170

Are stainless steel alloy surcharges coming to an end?

The recent announcement to cease setting the European ferrochrome benchmark prices from June 2024 marks a significant shift in the stainless steel market. Alloy surcharges, which have historically relied on these benchmark prices, will need new bases for calculation. This change introduces uncertainty and speculation about the future of alloy surcharge mechanisms.

Possible Directions for Alloy Surcharges

  1. Market-Driven Pricing: With the disappearance of the ferrochrome benchmark, stainless steel mills might shift to a more market-driven approach, relying on spot prices for alloying elements like ferrochrome. This could increase price volatility but may better reflect real-time supply and demand conditions.
  2. New Benchmark Agreements: Industry players might form new agreements to establish different benchmarks, potentially involving other significant producers or consortiums. These new benchmarks could serve as the basis for alloy surcharges, though their stability and acceptance remain to be seen.
  3. Index-Based Surcharges: Stainless steel producers might start using existing metal indices, such as those provided by the London Metal Exchange (LME) or other commodity exchanges, to determine alloy surcharges. This would tie surcharges more closely to global market prices, potentially increasing transparency.

Speculation on Future Market Dynamics

The end of the established ferrochrome benchmark opens the door to various speculative scenarios regarding how alloy surcharges will be determined:

  • Increased Volatility: Without a stable benchmark, the market might experience increased price volatility as surcharges fluctuate with market conditions.
  • Arbitrage Opportunities: Traders and manufacturers could exploit price differences between different regions or indices, leading to new trading strategies and possibly new financial instruments.

Proposal for Ferrochrome and Stainless Steel Scrap Futures on the LME

The proposal by the stainless steel recycling industry to introduce ferrochrome and stainless steel scrap futures on the LME is a notable development. If implemented, these futures could provide:

  • Hedging Tools: Market participants would have new tools to hedge against price fluctuations in ferrochrome and stainless steel scrap, providing more stability and predictability in cost structures.
  • Price Discovery: Futures markets enhance price discovery, offering a more transparent view of market expectations and future price movements.
  • Investment Opportunities: New futures contracts could attract investors looking for exposure to the stainless steel market, potentially increasing liquidity and market depth.

Impact on Base Metals

While alloy surcharges and future contracts are critical discussions, it’s also important to consider the broader context of base metal prices. The favorable trend in base metals on exchanges like the LME and SHFE, with increases in prices for copper, zinc, lead, nickel, and aluminum, suggests a generally positive outlook for industrial commodities. This trend could support higher stainless steel production costs but also indicates robust demand and economic activity.


The discontinuation of the EU ferrochrome benchmark prices by Merafe Resources will significantly alter the landscape of alloy surcharges for stainless steel. Market participants are likely to explore various alternatives, from market-driven pricing to new benchmark agreements and index-based surcharges. The potential introduction of ferrochrome and stainless steel scrap futures on the LME adds an intriguing dimension, promising new hedging and investment opportunities. The overall favorable trends in base metal prices further underline the dynamic and evolving nature of the metals market.

Full story on