Tuesday, March 2, 2010

Merafe Announces 2009 Loss But Bullish For 2010

JSE-listed ferrochrome producer Merafe, suffered a R152-million loss in the year to December as it recovered from the global financial crisis.

The company operates a joint-venture with Xstrata and its share of saleable ferrochrome for 2009 rose to 281,000 tonnes against 223,000 tonnes the previous year, while revenue fell to 1.8 billion rand ($234.4 million) against 2.8 billion the previous year.

CEO Steve Phiri said on Tuesday that ferrochrome stock levels were at historic lows but that they were the equivalent to only ten-weeks of consumption, compared with 24 weeks in 2008. Prices were now at USc103 a pound with the company’s marketing team currently in Asia working on Q2 contracts. Mr Phiri expected these prices to be announced at the end of March.

However, he warned that supply would be tight until 2013, given the absence of electricity availability, coupled to limited access to finance for large capital projects. South African electricity producer, Eskom, is building two coal-fired power stations that are expected to come on stream in three years’ time.

China’s demand for steel is leading to huge demand for ferrochrome from that country. Mr Phiri said that China alone was able to consume all the company's production and that if demand from the rest of the world increased there would be serious supply shortages, something the company is already seeing evidence of.
During the last year Merafe halved its ferrochrome inventory in the period, reduced its net financing costs by 81% and has R463-million cash on hand.

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