Spurt In Ferro Chrome Prices Round The Bend

The recent tender by South Korean steel producer Posco for 18,000 tonnes of high carbon ferro manganese was won by Posco's trading wing for at $391.80 per tonne CIF with the material coming from China. The supplies will be over a period of one year.

The tender for medium carbon ferro manganese was won at $618.80 per tonne CIF for material from China. During last year the lowest price offered by China for high carbon ferro manganese supplies to Posco was $419 and for medium carbon ferro manganese it was $678, which shows that prices have fallen steeply during the last few months.

 

World prices are falling for ferro manganese. They are also falling for high carbon ferro chrome and now they are between 38 to 40 cents per lb of chromium CIF. There has been a recent hue and cry in Andhra Pradesh over supply of NTPC power to ferro alloy producers for export production. This criticism is not based on correct facts. NTPC produces over 100 billion units of power a year and it is a profit making company. It sells this power to state electricity boards in the area at an average price of less than a rupee per kwh and the state boards profit a great deal from NTPC power.

Since NTPC is a central government enterprise the Centre has a discretionary quota of 15 per cent of the power produced by the NTPC which it can sell to anybody as per laid down policy. Centre gives this power to railways, Coal India, defence and other vital installations which need not depend on the vagaries of state grid supply.

A plea was made to Centre by ferro alloy producers that since power cannot be imported and since government allows duty free imports against exports, a portion of the NTPC power at the disposal of the Centre should be supplied to ferro producers for export production.

After much discussion and hesitation this was implemented in Andhra Pradesh and six ferro alloy units were given about 60 mw of power at a cost of about 110 paise per kwh. After transmission and distribution losses, state wheeling charges and taxes the power cost to ferro alloy units works out to about 150 paise per kwh against the state tariff of 375 paise.

The policy has been in vogue for about four years with some stoppages for short periods and helped Andhra Pradesh to emerge as a major exporter and producer of ferro alloys. Now some critics allege that the state electricity board has lost Rs 600 crore due to this power supply to ferro producers as it could have got 375 paise per unit on this power. This is incorrect as the state government would never have received this power as its entitlement from NTPC had been fully supplied.

It is the discretionary quota of the Centre and it is to aid export production. The state cannot loose on what it would not have received. With the ferro alloy prices crashing in the world withdrawal of such power would cause immense damage to the ferro alloy units. The critics want the power supply to ferro alloys to be stopped and made available to state grid for supply at 375 paise. At such high rate of power no ferro alloy can exported.

The units which receive this power are Facor, VBC Ferro, Nava Bharat Ferro, GMR Vasavi, Jindal Ferro and Andhra Ferro. There has been an accusation that some of the units have drawn the concessional power but have not exported. This could be investigated and the those units which failed to export could be forced to export. If they fail to perform their power could be disconnected and on the units supplied they could be made to pay the differential between NTPC and State grid power.

In fact the ferro alloy units themselves should devise this reporting system and implement it in a transparent way. But the industry here generally takes advantage of loopholes and profits from it. In Karantaka Sandur Manganese gets NTPC power and produces and exports ferro silicon. VISL has not been given this power as it fails to pay its power bills.

In Maharashtra the scheme was in operation for some time but has been now been suspended. Only the units in Andhra were getting it and are now likely to loose it.