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| Negotiations On FeCr Price For Shipments In Q2 / 09 Are Carried Over To April |
| = Key Point Is Plan To Raise Electric Power Fee In South Africa |
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It has been strongly anticipated that the negotiations with overseas customers on price of South African charge chrome for shipments in April - June quarter of 2009 will be carried over to April. Particularly, in view of the matter which Eskom of South Africa has planned to raise considerably electric power fee after Presidential Election to be held on the 22nd of April is over, the situation of electric power fee in South Africa is thought to put a delicate influence on pricing of South African charge chrome for the second quarter of April - June. Eskom, national electric power corporation of South Africa, has been granted in June of 2008 by the Government of South Africa to raise electric power fee by 27.5% in form of reapproval but, as regards electric power fee for the future, Eskom announced in November of 2008 that it will be necessary to raise electric power fee by 20 - 25% per annum for the next 3 years. This announcement is due to a necessity that, in order to cover the future demand for electric power, Eskom has to invest R.343.0 billion (corresponding to US$32.0 billion based on exchange rate at that time) per annum and this necessary fund is required to obtain from electric power fee. For this purpose, Eskom has aimed to double a level of electric power fee in the future from that at present. At Presidential Election to be held on the 22nd April of 2009 in South Africa, Mr. Jacob G. Zuma, Chairman of NUM, is anticipated to be certainly elected and there is a strong opinion in the power industry that, on the 23rd of April when the Election is finished, a raise of electric power fee will be announced. The electric power fee in South Africa has been supposed to be the lowest in the world but a raise of electric power fee in South Africa will become a substantial factor to increase the cost for the ferro-chrome industry in this country. Electric power fee in South Africa has been raised by 27.5% in 2008 (initially planned to raise by 17%) and this increase of the cost was digested by the steeply risen prices of ferro-chrome at that time but is now thought to come to a considerable neck for April - June quarter. The benchmark prices of South African charge chrome for shipments in January - Mach quarter of 2009 have been settled at 79 US-Cents per lb. of Cr on DDP base for Europe, as reduced by 57%, and at 87 US-Cents per lb. of Cr CIF for Japan, as reduced by 65%, respectively. Spot cargoes of high carbon ferro-chrome have been recently contracted with stainless steel mills in China at lower prices than 60 US-Cents per lb. of Cr CIF. In expectation of the global boom of chrome, India produced an excessive quantity of ferro-chrome and this overproduction has accelerated the tendency as mentioned above. However, it has been viewed that, when March to close settlement of accounts in India is over, the aggressive sales of ferro-chrome at discounted prices by Indians will pass over the peak. By taking into consideration of the movements of spot price, the benchmark price of South African charge chrome for April - June quarter has to be on a trend to fall. However, in view of such various circumstances as (1) South Africa has been reducing their production of charge chrome to a large extent (operating only at 10- 20% of whole capacity), causing to increase the cost., (2) it has already passed 6 months since the cutback has been implemented and, consequently, the stocks of ferro-chrome at South African producers are being normalized., (3) Eskom so far did not say about an extent to raise electric power fee but it is estimated to be more than 20 - 30%., (4) owing to a depression of the world economy at present, the supply situation of electric power in South Africa has been currently loosened but is understood to be basically tight until 2013, when two new electric power generation plants are scheduled to commence its operations, and there is a probability to come up again in 2013 a crisis of electric power as emerged in 2008., and so on, a dispute of whether it is appropriate or not to reduce benchmark price of South African charge chrome for April - June quarter has awaited. |
| last modified : Mon 30 Mar, 2009 [12:50] |
