Samancor Chrome Ltd., the world’s second-biggest ferrochrome producer, may resume some output of the raw material by July after an improvement in demand from Chinese stainless steel makers.
The first half will likely see “limited” production at the company, which suspended all output last year, chairman Danko Konchar said today by phone from Beijing. The Johannesburg-based company may restart as many as 3 of its 16 furnaces, he said.
Ferrochrome makers have suspended more than two-thirds of capacity, according to competing South African producer Merafe Resources Ltd., as the global economic slowdown erodes demand for stainless steel. First-quarter ferrochrome contract prices plunged 57 percent from the preceding three months.
Inventories of some types of the raw material are now close to needing replenishment, Konchar said. International Ferro Metals Ltd., which stopped production in South Africa in 2008, said last week the market has begun to stabilize, and it may restart furnaces from April 1. Chinese demand has risen, Merafe said today in a statement.
Merafe gained 8 cents, or 14 percent, to close at 65 cents in Johannesburg trading today. Full-year net income quadrupled to 1.03 billion rand ($100 million) after ferrochrome prices traded at a record in 2008.
Merafe doesn’t expect a recovery in second-quarter contract prices as demand from Europe, North America and Japan is still “low,” Chief Executive Officer Steve Phiri said in a presentation in Johannesburg.
“Everybody rushes to China, and of course prices are going down” as a result, Konchar said. Still, “there is not too much space” for prices to fall further in the second quarter, he added.
European benchmark contract prices fell to 79 U.S. cents a pound in the first quarter, from $1.85 in last year’s fourth quarter.
“At this level, we see today a lot of producers are losing money,” Konchar said. “All options are on the table,” he said when asked whether Samancor will cut jobs in South Africa.
Switzerland’s Xstrata Plc and Merafe operate the world’s largest ferrochrome producer, which is operating at about 20 percent of capacity.
Source: Bloomberg
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