The Japanese and South African producers are locked in a wrangle over the October/December price for high carbon ferro chrome. The Japanese are demanding price cuts over the previous contract price of 46 to 47 cents CIF per lb. There are now reports that the downslide in H C ferro chrome price has stopped and in fact there may be an increase in the spot prices.
Standard Equities of South Africa forecasts that spot price of H C ferro chrome could be ranging between 44 to 49 cents in the near future and there is little likelihood of the prices sliding below 43-45 cents CIF. Many of the South African producers are said to be facing production problems and they are lagging in their deliveries.
There were also shipping delays and the surplus had been reduced. And, therefore, in the spot market there could be a rise.
In China the average level of cost of production is said to be between 48 to 50 cents per lb FOB, while a few plants may produce at 45 cents. But this is becoming difficult as the chrome ore prices are relatively high. Perhaps with the market economy taking hold in China, enterprises may be forced to sell at break even prices which should raise the prices of ferro alloys exported from China.
The South Africans reportedly want to put up the contract prices of charge chrome during the first quarter of 1998 as the year now passing has been of low profits to the industry as whole. The result may be that Kazakhastan may emerge as a larger supplier of ferro chrome in the spot market.
Samancor Chrome operations: Samancor during 1996-97 produced 2.7 million tonne of chrome ore which was slightly lower than 2.8 million tonne produced in the previous year. The total sales were over 3 million tonne which included Samancors own consumption. The price rise in exported chrome ore was about 9 per cent. But unit production costs rose steeply due to raise in minimum wages. Overall the financial results were satisfactory.
Ispat Alloys: Ispat Alloys among major ferro alloys producers is a survivor and amidst losses all around it has come out with reasonable profit for the year 1996-97 despite the fact that it exported nearly 50 per cent of its production.
Ispat Alloys for the last about three years has been exporting an average of 50,000 tonne of silico manganese to the U S and Japan every year. It has now appointed Anderson Consultants to revamp its operations and make it more economic.
During year ending March 1997, the year is for 14 months, total income was Rs 182.50 crore. Total expenses inclusive of interest and depreciation were Rs 176.6 crore and profit before tax was Rs 5.86 crore. Provision for tax is Rs 70 lakh and net is Rs 5.16 crore.
During the 14 months the company had sales of 65608 tonne of ferro alloys and 8647 tonne of steel and alloys. The company has an installed capacity of 76500 tonne of ferro alloys while the production was 66296 tonne
The company used 22910 tonne of quartz , 46,779 tonne of coal and charcoal and 1906 tonne of electrode paste . Manganese ore consumption was 102,982 tonne and chrome ore 9331 tonne.
The directors report says that the company has taken steps to increase its captive power generation capacity from 19 mw to 40 mw by installing two new imported DG sets of 10.5 MW each from MAN B&W of Germany at its works. However the sets have developed trouble and the supplier has agreed to take corrective action. The company is adding an additional ferro alloy furnace .
The average cost of the power purchased from the electricity board was Rs 2.25 per kwh during the year. The cost of power produced in the captive units was Rs 1.50 per unit. The per tonne consumption of electricity for Samancor Production was around 4168 units.
The company has plans to install continuous casting for Siman and other ferro alloys to increase yield and improve the quality. It also wants to design a small furnace for conducting R&D activities for the production of low carbon ferro alloys.
The directors report states that the company has undertaken backward integration plan by applying for chrome and manganese ore leases in Orissa.
The chrome ore lease had been granted but the matter is still under dispute. The proposal to grant manganese ore lease is under active consideration of the government. The company also plans to put more power producing capacity to make more power available to ferro alloy production.
The notable feature of the period under review was the increase in sales revenue despite adverse trading conditions and cost increases . This has saved the company from losses.