High-Carbon Ferro Chrome Prices Slated For A Decline

The world high carbon ferro chrome prices for October/December 1998 are likely to fall, according to analysts.

There is surplus production in the world ferro chrome market and stainless steel production is turning uneconomic.

Some analysts say that contract prices may fall from the present 45 to 46.5 cents to 43 to 45 cents while yet others assert that they will slip to 40 cents per lb of chromium CIF.

Even at the current prices, it is said that there are heavy discounts and prices cannot hold during the remaining months of 1998.

Spot prices are around 40 to 42 cents per lb and there is no end to the slide.

 

What is ominous for the Indian ferro chrome producers and exporters is that even at these low prices South Africa and Kazakstan can produce and export at a profit.

And these producers can continue to sell at low prices for years, sending the ferro chrome producers in India and China to their doom. There does not seem to be any sign of revival well into the next century.

The strategy of large producers like Samancor and Glencore, each have a capacity of million tonnes of high carbon ferro chrome to make their production efficient and low cost. These two producers and Kazak people can meet most of the ferro chrome needs of the world.

According to Samancor there is likely to be a surplus of 50,000 to 100,000 tonnes of ferro chrome in 1998 in the world market which is likely to increase by another 100,000 next year. In 1998 the Kazak supply is likely to fall by 145,000 tonnes it but would increase by 110,000 tonnes in 1999. Net South African ferro chrome production increased by 220,000 tonne in 1997 and 200,000 tonnes in 1998 and markets stocks are said to be around 2.7 months consumption. Samancor's ferro chrome production increased from 881,000 to 935,000 tonnes.

What is important is that on sales of Rands 4.08 billion for the year ending June 1998 operating profit rose to R 568.9 million showing a margin of 13.9 per cent. Sales in 1996-97 were R 3.71 billion with operating profit at Rands 407.1 million giving a margin of 11 per cent. Margins have improved despite poor prices in the world market. This is because Samancor has tried to cut costs and improve productivity in its mining and smelting operations. During the year there were six ferro chrome furnace rebuilds to improve efficiency. There was further scope to cut down production costs, notes the company report. The key to cutting costs is the pelletising plant at the Ferrometals plant at Witbank which has been recently completed.

The furnace has been rebuilt to accept the pellets and another two more furnaces are being modified to accept pellets. Samancor has also undertaken a feasibility study for a green field ferro chrome plant and a decision on the new plant would be taken very soon. The existing plants would yield an extra capacity of 100,000 tonnes.

Apart from falling ferro chrome prices, falling prices were noticed in manganese alloys also. Here also to get better results Samancor is increasing the pellet plant capacity from 0.5 million tonnes to one million tonnes which is expected to be completed in April 1999.

This will lower costs of production and boost profit. Even with price fall in the world market for ferro alloys Samancor hopes to earn better profits in the current year than before. South Africa has nearly 80 per cent of the world deposits of good quality chrome and manganese ore.

`The power costs is less than two US cents which makes it the most economic producer of ferro alloys in the world, particularly ferro chrome and manganese alloys. It must be said to the credit of the large Indian ferro alloy producers they have been pioneers in sintering and pelletising their ores but power costs being very high they are not able to cut down costs to world levels.