[miningmx.com] – MERAFE Resources said the second-quarter
ferrochrome price had increased 17% – a development its CEO, Stuart Elliot, said was
tied to shortages stemming from furnace closures.
Up to 45% of South African productive capacity had been temporarily shut after
Eskom bought back power from ferrochrome producers where electricity consumption
is deemed intensive.
“Shareholders of the company [Merafe] are advised that the European benchmark
ferrochrome price has been settled at $1.35 per pound for the second quarter of
2012,’ Merafe said in an announcement to the JSE. This represented an increase of
17% from the $1.15 per pound price in the first quarter of 2012, it added.
The increase is the highest being paid for ferrochrome by users in a year, according
to data supplied by Merafe Resources as its full-year results announcement in March.
However, Alistair Ruiters, CEO of Rukki, a ferrochrome producer, said that there
would be discounts on the spot price, bearing in mind Merafe’s published price
representing the benchmark price.
“Obviously, we are happy that the price is higher than last quarter, and given the
tough conditions in the ferrochrome industry, the price is moving in the right
direction.
This is, however, not the spot price and we expected to see significant discounts on
spot,’ Ruiters said.
Shares in Merafe gained 5.56% by midday to trade at 95c/share, its highest level in
nearly two months. Merafe recorded a 52-week high of 1.60/share.
“It’s unprecedented to have cutbacks in supply of ferrochrome in this part of the year,
so there’s activity around that,’ said Elliot in an interview. However, he stopped short
of saying whether improved ferrochrome prices would continue in the medium-term.
“It’s really too soon to say anything about that,’ he said. “There are normally
cutbacks in winter as well, but it’s quite hard to have visibility at this stage.’
However, demand from China would continue to be robust. “I know they are slowing
the economy, but it’s off a pretty high base,’ Elliot said.
Global ferrochrome demand, a metal used in the manufacture of stainless steel,
increased 2% in the 2011 calendar year compared to 2010 at some 9.3 million tonnes.
Supply, however, was static, although South Africa contributed 9% less to the market
as China grabbed market share – a development that has triggered fresh calls for a
chrome duty on South African exports.
Chris Jordaan, CEO of International Ferro Metals (IFM) said alloy stocks were
relatively low, but the 16% increase in the Eskom tariff, as opposed to the 25.9%
that should have been imposed, was still driving prices higher. “It’s a relatively
buoyant market, but we need to proceed with a bit of caution,’ Jordaan said.
IFM shut two furnaces and sold the power back to Eskom, whereas Merafe Resources,
which is in joint venture with UK-listed mining giant, Xstrata, shut seven furnaces in
total. Shares in IFM, which is listed in London, were unchanged.
