Ferrochrome Benchmark Price Up 35 Per Cent

Merafe Announces FeCr Q2 Price

South Africa’s Merafe Resources has announced that its benchmark ferrochrome price for European customers has been settled at $1.36 a pound for the April to June quarter.

The price is a 35% increase over the first quarter.

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.

Ferrochrome Output Down 30 Per Cent At Xstrata-Merafe JV

Merafe Resources said on Monday that ferrochrome production at the Xstrata-Merafe Chrome joint venture for the year ended December 2009 fell by 30 percent compared to the previous year.

Output was 203,000 metric tonnes in the year ended December 31 2009, compared with 290,000 metric tonnes in 2008.

The company said in a statement to shareholders that the fall was a result of the suspension of up to 80 percent of production capacity in late 2008 and early 2009 in response to the rapid decline in market conditions.

Production has been progressively increased from 20 percent of annual capacity in early January to approximately 85 percent by year end as demand for ferrochrome from the world’s steelmakers improved.

Merafe stated that the strengthening of the Rand against the US Dollar exerted pressure on margins and together with improving demand, enabled ferrochrome producers to achieve a 30 percent increase in the ferrochrome price from $0.79 (R6) per pound in the first quarter of 2009 to $1.03 per pound in the fourth quarter of 2009. It attributed the loss to low ferrochrome prices and a strong rand.

Ferrochrome Production Increased At Xstrata-Merafe JV

The demand for ferrochrome has risen, Merafe Resources said on Wednesday.

It haS responded by increasing ferrochrome production capacity at the Xstrata-Merafe joint venture to 60 percent, the company said in a statement.

This had necessitated the re-commissioning of several furnaces at the venture's five ferrochrome operations.

The venture had been using only three of its 20 ferrochrome furnaces due to a drop in the price of ferrochrome.

"Ferrochrome demand is being monitored on a continuous basis and capacity utilisation will be adjusted in line with such variations in demand," Merafe said.

SourcE: Business Report

Eighty Percent Of Merafe Ferrochrome Capacity Now Shut

Eighty per cent of the capacity of Xstrata-Merafe ferrochrome venture is now shut, but no lay-offs of permanent employees were anticipated, the JSE-listed Merafe Resources said on Friday.

Eleven furnaces were suspended in early December and another six furnaces have now been suspended. The total suspended ferrochrome production capacity, Merafe said, now represented 1,37-million tons or 80% of annual operating capacity.

The venture will continue to monitor prevailing market conditions though it stated that no lay-offs are anticipated for permanent employees.

The retention of full-time personnel would enable the venture to return to capacity quickly and efficiently when market conditions allowed, Merafe added.

Source: Mining Weekly

SA Ferrochrome Producers Hit By Power Crisis

South Africa's power crisis is expected to cut output in the world's top supplier of ferrochrome by 5-10 percent yearly, hurting world supply and ensuring that prices remain firm, officials said on Tuesday.

South Africa has the majority of global reserves for the ferro-alloys manganese and chrome ore, and analysts and markets have kept a close eye on power shortages that have left producers operating at only 90 percent capacity since January.

State-owned power utility Eskom is battling to meet demand in Africa's biggest economy.

Steve Phiri, chief executive officer at South Africa's Merafe Resources said output in the sector would be hit until 2012 when full power is restored once Eskom's planned new generation capacity comes on-stream.

"This will create opportunities for rival producers like Kazakhstan, India and China to step in and take advantage," he said. "South Africa is also losing credibility as a reliable supplier of ferrochrome and hurting investor confidence."

Phiri, who spoke on behalf of South African producers, including rivals Hernic Ferrochrome and Samancor, said: "Will market supply be met? The power crisis will put pressure on the supply of ferrochrome globally. People will celebrate having strong prices, but we know this is artificial."

Dankor Konchar, chairman of Samancor said the biggest threat to South Africa's status at the helm of the ferrochrome output would come from Kazakhstan, which can already produce at much cheaper cost than South Africa.

"If they take this chance and take over as a global leader and take up our customers, it will be very difficult four years down the road to try to win customers back," he said.

The power crunch, coupled with the growth in the Chinese stainless steel sector has sent ferro-chrome prices soaring.

Similarly strong demand from the end user sector and short supply has also contributed to record prices for manganese ore.

"We are in serious trouble, and we are going to be in this mess for a long time to come," Algie Kiewitz, Eskom's acting general manager for transmission and customer service.

"The country does not have enough sufficient generation capacity to meet demand at all times; this is the reality we have to face."

He told the ferrochrome sector that Eskom has taken into consideration about 99 percent of the industry's power needs under its plans for a 5-year, 350 billion rand ($44 billion) programme to add new power capacity.

He said Eskom has set aside some 1,000 megwatts for the ferrochrome and the manganese sectors' future growth plans, to come on stream by around 2012. At the moment, he urged the sector and other big power users to cut demand by 10 percent.

"The system is still extremely vulnerable," he said.

The country's gold and platinum mines were shut for five days in January as the power crisis worsened, curbing output and sending precious metal prices soaring.

Andre Wilkens, the chief executive of African Rainbow Minerals (ARM) said ferrochrome smelters at the diversified mining firm had been hit by the power crisis.

"We have seen a 10 percent reduction in output from our smelters, but our coal and platinum mines are shallow and we have coped better," Wilkens said.

Worried participants said the big question was whether South Africa is still offering competitive advantages in the sector.

Kiewitz said that despite the crisis, and even with a power tariff increase of 27.5 percent by Eskom for the 2008/09, South Africa was still a competitive destination for investment.

Source: Reuters