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Mining and Forestry
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Record-breaking ferrochrome homing in on $5.00 a pound, supply scarcity continues..poi.vRecord-breaking ferrochrome homing in on $5.00 a pound, supply scarcity continues By Martin Hayes - Senior Correspondent, MINOR METALS.COM London, 18 March 2008 - Ferrochrome prices continued to move remorselessly higher in Europe this week, setting new all-time highs consistently, and with low-carbon material getting ever closer to the $5.00 a pound level. "Some very low carbon content is trading at $5.20, $5.30, maybe. But generally people are reluctant to book at $5.00. When that is paid it will set a new floor," a trader said. Availability remained desperately thin, due to strong steelmaker demand and a lack of supplies from key producer South Africa, where crippling power shortages are set to continue for the foreseeable future. Low-carbon ferrochrome, around $4.25/4.50 just over a week ago, rose to $4.80/5.20, while high-carbon rose to some $3.00/3.20, versus recent levels of $2.50. Lehman Brothers analyst Michael Widmer noted that stainless steel mills, particularly in Europe, have increased ferrochrome purchases noticeably during the past few months, after having drawn down stocks significantly. This is partly because stainless demand has been picking up. "In addition, we believe that steel producers anticipate further ferrochrome shortages on possible supply problems in the near future, so they place orders above their current needs," he added. South Africa is the world's top producer of ferrochrome, accounting for 45 percent of total global availability, with China producing 17 percent and Kazakhstan 13 percent. A series of force majeures in major producer South Africa have underlined how tight the market's supply/demand picture is, and prices, already in uncharted territory, may go much higher yet. "The market is getting very tight and it is more and more difficult to secure material," the trader said. SOUTH AFRICAN POWER FAMINE, QUARTERLY CHARGE CHROME CONTRACTS SEEN HIGHER The supply crisis has arisen because South Africa's Eskom, the state-power supplier, has been rationing nationwide power to its industrial customers. Miners have been restricted to 90 percent of the electricity they would normally need, which has hurt production. Prices of other alloying materials, such as vanadium, have also soared as a result. The rally kicked off in early-February, when Xstrata Alloys, a unit of global mining giant, Xstrata plc, declared force majeure to its ferro-chrome and vanadium customers. Merafe Resources has also declared force majeure on ferrochrome production at its chrome venture with Xstrata Plc. The venture has a total managed capacity of 1.96 million tonnes of ferrochrome. Meanwhile, Samancor has also declared force majeure on intermediate-carbon ferrochrome shipments, although this was due to an accident at the Ferrometals complex in the Mpumalanga province. The plant may be closed for some months. Current strength is also causing estimates for the increase in second quarter charge chrome contract settlements to be raised significantly. These rose from $1.00 a pound in the final quarter of 2007 to $1.21 for the first quarter of 2008. Recent forecasts had centered on $1.50 a pound, but with spot quality Indian origin charge chrome trading at some $2.60, the settlements are likely to be around $2.00, traders say. |
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