Ferro alloys producers raise capacity utilisation

Indian ferro alloys producers have raised their capacity utilisation in a major way since the second fortnight of February on a revival in demand for steel, which started in the fourth quarter of the last financial year.

The ferro alloys industry has already achieved a production capacity utilisation of 60 per cent in the last one-and-a-half months after falling to 35 per cent in October-November, said T S Sundaresan, Secretary General of the Indian Ferro Alloy Producers’ Association (IFAPA). But the industry was likely to achieve its normal capacity utilisation level of 70 per cent in the next two quarters, he added.

Nearly 20 per cent of the existing 150 furnaces had to close down and around 30 per cent opted for production cut in the October-January period on the back of more than half a million tonnes of inventories that piled up in the period.

India produced around 2.36 million tonnes of ferro alloys in the last financial year, which is likely to come down to 1.90 million tonnes this year. With global steel majors such as ArcelorMittal and Posco having cut their output by up to 45 per cent due to slackening demand, ferro alloy exports are likely to fall by 25 per cent.

Since the second half of the last financial year, especially November onwards, orders plunged to “nil” with no shipment to Korea, Japan, Europe and the US (destinations accounting for almost 80-85 per cent of the Indian output).

However, orders have improved slightly since February, indicating a revival in steel and stainless steel productions.

Depending entirely on the steel sector, the ferro alloys industry would react to higher steel demand only after this quarter, said a senior official of one of the leading secondary steel producers.

ro alloys largely consists of ferro chrome, ferro silicon, ferro manganese and silico manganese. Their share is very nominal in overall steel production, varying between 0.5-11 per cent depending on the grade of steel.

R K Saraf, chairman and managing director of Ferro Alloys Corporation (Facor), the country’s biggest ferro alloy producer and exporter, sees tough times ahead. “The worse is yet to come as Chinese steel producers are yet to resume production,” Saraf added.

According to him, only a few Indian units might have got some orders from China, so the outlook remains bleak.

According to Saraf, the cost of ferro chrome production in China comes to around 65 cents per pound as against the current market price of cents 55 cents, same as the production cost in India.

The country’s steel producers, including SAIL, Tata Steel, Jindal Steel, Essar Steel are witnessing a better demand for the commodity since the last quarter of FY09 than the previous quarter, mainly on an upsurge in the construction sector.