Metal Bulletin (can only copy source code)
p>International Ferro Metals (IFM) is hoping to secure a charge chrome contract price of at least $1.50 per lb in second-quarter negotiations, the firm’s senior management said last week.“As a management team, we are very confident that in the second quarter prices will be at $1.50 or above. . . none of the ferro-chrome commentators are expecting prices to recede going forward,” md Stephen Turner said during a site visit at the company’s Buffelsfontein operation last week.
IFM is already marketing its charge chrome well above the first quarter’s record contract price of $1.21 per lb, Turner said.
“We’re not waiting for the second quarter to sell above $1.21 per lb — we’ve already sold at $1.48,” Turner said.
Recent power cutbacks by South African electricity provider Eskom, which have left ferro-chrome operations running at 90 percent of capacity, will add to upward pressure on prices during second quarter negotiations, director Ronnie Barnard added.
“The power situation is good for ferro-chrome and good for the ferro-chrome price,” he said.
IFM’s operations were running at 88 percent of capacity last week and will be running at 90 percent within the next few weeks, Barnard confirmed.
The power situation, which is set to continue until 2013, will lend long-term support to the prices, Barnard said.
Even if Eskom doubles its industrial customers’ electricity supply, chrome producers including IFM will be able to make a profit by passing on the cost to its buyers, chairman Tony Grey said during the visit.
The push for higher prices is also underpinned by the growing demand for ferro-chrome from stainless steel producers in China, Grey said.
“The world needs one [project with the same capacity as] IFM to come on every year to meet that demand,” he said.
Chinese ferro-chrome consumption should stay strong despite the growing threat of a US recession, he added.
“The expectations are that this is going to be a shallow recession. . . stainless steel can’t help but be affected, but then China marches to a different drumbeat [and] I don’t see that any [US] slowdown will affect the situation in China,” Grey said.
IFM’s management also played down the possibility that rising chrome prices will increase production of austenitic, nickel-bearing grades of stainless steel rather than ferritic, chrome-bearing grades.
Market participants have speculated that, since the power cuts, the lower nickel prices and soaring chrome prices could suggest a move back into production of austenitic grades.
“You can make stainless steel without nickel, but you can’t make it without chrome. Chrome is very important to the stainless steel industry, and the industry is dependent on South Africa for chrome supply,” Barnard said.
IFM is in “the advanced stages of talks” with banks about the next stage of its debt restructuring that will take production to 665,000 tpy.
IFM announced in July that it is planning to increase production at the Buffelsfontein operation in South Africa and that it will finance the R3.2-billion ($464 million) expansion through an additional share placing (MB Jul 10).
The placing raised some $172 million for the expansion, since when IFM has joined the FTSE250 index in London after initially listing on the Alternative Investment Market.
The completion of the replacement debt structure is set to be put in place by the end of this month.
Once the expansion is complete, IFM could look into acquiring a new project and moving into the production of other metals, Turner told MB, although he said that any discussion regarding mergers and acquisitions is still at an early stage.
High-carbon ferro-chrome was trading at $1.95-2.25 per lb on Monday, while low-carbon material basis 0.10 percent was trading between $2.90 and $3.20 per lb
