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IFM restarts furnace despite gloomy outlook
Ines Schumacher
Posted: Tue, 31 Mar 2009
[miningmx.com] -- FERROCHROME producer International Ferro Metals Limited (IFM) will restart one of its furnaces in mid-April despite a gloomy forecast for ferrochrome prices in the second quarter of 2009.
“The price negotiations for the second quarter are ongoing, but we don’t expect the price to be any higher than in the first quarter,” IFM managing director David Kovarsky told Miningmx. He said he could not give an outlook for anything beyond the second quarter in the current market conditions.
The ferrochrome price has fallen from $1.92 per pound in the June quarter of 2008 to $0.79 per pound in the first quarter of 2009. Approximately 72% of world ferrochrome production has been suspended as at 31 January 2009.
IFM is restarting one of its two South African furnaces in mid-April to run at 60% capacity for the duration of three months. Both of the furnaces were
switched off on 25 November 2008 as IFM focused on selling its inventory. The company incurred significant price reductions and writedowns of inventories over the December half.
“IFM has decided to convert its raw material inventory, comprising mainly chrome ore and coke, to finished product in order to monetise those inventories and generate a contribution towards fixed overheads,” the company said in a statement on Tuesday.
In three months, IFM will reassess the state of the ferrochrome market which would need to improve from current levels to warrant a continuation of production.
"We view the company’s decision to re-start one furnace at this point as a function of working capital management, rather than an indication of improving stainless steel market conditions," Numis Securities said in a Metals & Mining company update on Tuesday.
Kovarsky said IFM is in negotiations with the National Union of Mineworkers to retrench 135 employees out of
its total workforce of 370, leaving it with enough employees to operate the single ferrochrome furnace.
IFM has so far indirectly laid off 550 workers employed by contractors at its operations.
In order to reduce costs all senior employees including all board members have taken a 10% salary cut.
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