Johannesburg, South Africa — MININGREVIEW.COM — 29 April 2009 – Integrated ferrochrome producer International Ferro Metals Limited (IFM) – listed on the London Stock Exchange – says contract prices for ferrochrome should stabilise in the third quarter of this year and rise in the fourth quarter, driven by a resurgence in demand.
Reuters reports that prices for ferrochrome have dropped due to the global economic downturn caused by the financial crisis. It says the global ferrochrome industry has slashed output by around two-thirds in recent months in response to slumping demand. Most producers in South Africa – the world’s biggest producer of ferrochrome – have cut back sharply on production.
“In the fourth quarter I expect a resumption of higher demand for ferrochrome, and we should see a firmness in fourth quarter price and demand,” said company CEO David Kovarsky in an interview with Reuters. “By the fourth quarter we should have hit the bottom. We won’t be out of the woods yet, but we should be on the edge of the woods.”
London-listed IFM shut its two furnaces last November, but re-opened one last week to convert its raw material inventory to finished product to help contribute towards fixed overheads.
“The furnace will operate for three months,” he added. “Following this period we will assess the ferrochrome market to justify a continuation of production.”
IFM – whose stock is rated as a "buy" by Bank of America – has a peak capacity of 240 000 tonnes of ferrochrome. Last calendar year it produced 200 000 tonnes, and Kovarsky estimates it may produce about a tenth of that amount this year.
He said IFM was financially sound, and at the end of December, it had R500 million in cash.
“Even if we don’t sell another tonne of ferrochrome we shall be ok,” he added.
Nevertheless, Reuters reports that IFM was in talks with unions to cut 135 jobs, and that all senior staff will take a 10% salary reduction. Asked if IFM was likely to take part in consolidation in the ferrochrome sector in South Africa, Kovarsky decline to comment.
He said IFM planned capital investments totalling about R1 billion once it resumed normal production, mainly to help it cope with power shortages in the country.
Caption, Pic 1: IFM’s Lesedi chrome operation.