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| HOME >> Topics List >> April, 2009 >> 08 (Wed) |
| FeCr Price For Q2 / 09 Is Reduced By 10 US-Cents / Lb., Causing Crisis Of Profitability |
| = In Next Quarter, Electric Power Fee Is Applied To Winter Rate In South Africa, Resulting In Higher Cost |
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The benchmark price of South African charge chrome for shipments to Europe in April - June quarter of 2009 has been settled by a reduction of 10 US-Cents per lb. of Cr and, consequently, the profitability for South African ferro-chrome producers is thought to deteriorate further. Also, the next quarter (July - September) is winter season in South Africa and winter electric power fee (higher than usual rate) is applied. Therefore, this higher winter power fee is viewed to multiply the factors to press the profitability in production of charge chrome. The current operation rate as a whole to produce charge chrome in South Africa has come down to a level of 20% against the total capacity. South African producers have coped immediately with a depression of the chrome market emerged from October - December quarter of 2008 and endeavored to reduce their stocks of ferro-chrome. At present, the operations of electric furnaces by South African ferro-chrome producers are the followings. However, it has already passed 6 months, since the structure to reduce production of charge chrome has been set up, but a sign to recover the demand for ferro-chrome is still thin, even though April - June quarter is coming. <> Samancor Chrome = Out of 16 electric furnaces, only 3 furnaces are being operated, <> Xstrata Alloys (Merafe Resources) = Out of 20 electric furnaces, only 3 furnaces are under operation, <> Hernic Ferrochrome = All of 4 electric furnaces have been suspended to operate, <> IFM = All of 2 electric furnaces have suspended its operations but scheduled to resume from 1st April to operate one furnace, and <> Assmang (African Rainbow) : Operating all of 4 electric furnaces by 60% of nominal capacity. The benchmark price of South African charge chrome for shipments to Europe in April - June quarter has been settled by a reduction of 10 US-Cents per lb. of Cr as mentioned above and new price has come to 69 US-Cents per lb. of Cr on DDP base, having had a further reduction from 79 US-Cents per lb. of Cr for shipments in January - March quarter of 2009 settled by a considerable fall of 57% in comparison with that (185 US-Cents per lb. of Cr) fixed for shipments in October - December quarter of 2008. A space to purchase high carbon ferro-chrome (charge chrome) on spot base has been still left in European and Chinese markets and, in order to fulfill this space, spot cargoes of high carbon ferro-chrome are now being offered on a price level of 60 US-Cents per lb. of Cr CIF. It was informed that high carbon ferro-chrome has been recently purchased at 58 US-Cents per lb. of Cr CIF China on spot base. Under the circumstances, the strategy to bottom out by 79 US-Cents as intended by South African producers is supposed to be not possible to allow a persuasive power for realistic stainless steel mills in Europe. The new price of 69 US-Cents for Europe has corresponded to the level for the first half of 2006, when a recession in 2005 had been taken over and both of profitability and chrome demand were still unable to recover to an enough extent. The background, which ferro-chrome producers have taken a bearish attitude, is that the world output of stainless steel in 2009 is anticipated to shrink to a scale of 22 million tons, decreasing by 16% compared with that in 2008. The world production of stainless steel in 2008 had a decline of 7.7% from that in 2007 and that in 2009 is also estimated to have a further decrease. Ferro-chrome producers had once expected to recover the market in the second half of 2009 but have now got a severe blow. |
| last modified : Mon 13 Apr, 2009 [10:02] |
