Watch the prices of Chrome ore. ConsMin the only producer in...

Watch the prices of Chrome ore. ConsMin the only producer in Australia.
(RML in the Phillipines another would be producer to look at)

Chrome ore and ferro-chrome the next bull market.

Merafe ramps up production to cash in on record ferrochrome demand
With the international ferrochrome market likely to remain in a supply deficit until 2010, and prices expected to remain at record levels, local producer Merafe Resources said it planned to beef up production and have all 20 furnaces operational by the year-end.

The company, which shares ferrochrome operations with Xstrata, has already brought five out of seven furnaces that had been closed in 2006 to push prices up, back into production this year.

Two furnaces would be brought into production before the end of the year, which would increase the volumes of ferrochrome available for sale by 195 000 t/y. Merafe Resources’ attributable sales volumes from Project Lion, which would ramp up to full production by the last quarter of the year, would also increase.

The company’s nameplate capacity was 1,96-million tons a year and, by the end of 2007, it planned to produce 1,76-million tons.

Merafe FD Stuart Elliot said that the international ferrochrome market would be in a supply deficit for at least another three years, as limited additional capacity was coming on stream.

And, should companies start entering the ferrochrome business in an attempt to cash in on high prices, it would take at least three years to get a new operation up-and-running, as a result of long lead times associated with the world-wide engineering skills shortage.

The international market for ferrochrome, an ingredient used in the manufacture of stainless steel, would have to increase supply faster than the growth in the stainless steel industry in order for supply to catch up with demand, but CEO Steve Phiri said that this was not currently the case.

He explained that stainless steel production was anticipated to increase by 5% year-on-year in 2007, to almost 30-million tons a year, which would mean that ferrochrome production had to realise at least the same percentage growth.

The supply deficit was further driven by strong demand from China, where stainless steel production growth of around 38% year-on-year was anticipated to an estimated production of 6,8-million.

“China is our number one priority,” Phiri said, adding that by the end of 2007, the company would have increased its sales into that country to 20%.

Merafe had struggled for some time to enter the Chinese market, and in 2006, its sales into that market was 0%. But he said that an improved marketing effort and continued effort to build relationships had seen the company making inroads into China.

The strong demand for ferrochrome had resulted in prices increasing to $1/lb this year and the company was expecting prices to remain strong.

Phiri cautioned that, over the medium term, prices could soften, but that increased demand for the metal would result in high prices over the long term.

He was confident that the market had matured and that the cyclical nature of ferrochrome was “something of the past”.