ferrochrome price

Ferro-chrome prices to rise
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The quarterly contract price for ferro-chrome sold by South African producers to European stainless steel mills in the next quarter would rise, parties from both sides of the negotiating table said on Friday.

Producers must raise their prices to remain profitable despite the negative effects of high power costs and the exchange rate, they said, while the mills' order books are slightly better for the second quarter than the first quarter.

Still, the gulf between the sides was wide in the weeks prior to contracts being signed for the metal, used as an anti-corrosive additive to stainless steel.

"I'd say it will be a double-digit rise, but whether it ends up at 10 (cents per pound) or 12 or 15 I don't know. The stainless mills have no choice but to accept it," a supplier said. "It's the rand, it's power costs - the rand is just killing people. Everyone is talking double-digit figures and I've not heard of a single negative response."

One buyer was less dogmatic, saying the two sides would compromise.

"Producers are looking for a big increase and there's resistance from consumers, as always," he said.

"There will be a middle way: if producers are looking for 10 cents and consumers are talking about three, you can guess where it will end up."

Contracts for charge chrome, the high-carbon grade of the alloy produced in bulk in South Africa, were settled at 62-63 cents a lb in the current quarter, five cents lower than their level in the fourth quarter of 2005, and representing a total price reduction over the year of around 15 cents a lb.

The South African rand changed hands at 6,2770 per dollar on Friday, softer than its strongest point of 5,953 this year, but far stronger than the 11 to 7,5 range in which it traded for most of 2002 and 2003.

Producers, who pay local costs like power and wages in rand but are paid in dollars for their ferro-chrome, receive fewer rand per dollar when the local currency strengthens in relation to the US currency.

Number one producer Xstrata has suspended production at seven of its 16 furnaces - earlier this month it said it was suspending two furnaces at Wonderkop, two at Rustenburg and one at Boshoek, in addition to the two already offline at Wonderkop.

Rival producer Samancor Chrome, the world's number two, told Reuters last month it has shut six of its fifteen furnaces and was considering taking further units offline.

Contracts were expected to be signed at the end of March or start of April.

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