Sydney, Australia — MININGREVIEW.COM — 26 January 2009 – Integrated ferrochrome producer International Ferro Metals Limited (IFM) – listed on the London Stock Exchange, headquartered in Australia and operating in the North West Province of South Africa – reports that its ferrochrome sales and production are down in the light of the dramatic collapse in demand for the metal.
Reporting on its operations for the six months ended 31 December 2008, the company revealed that its sales volumes for the period had dropped to 49 435 tonnes – 20% below the 61 866 tonnes achieved in the second half of 2007. Production for the six months to 31 December 2008 totalled 90 759 tonnes, which was down 3% on the 93 317 tonnes in the six months to 31 December 2007.
The report added that the company’s ferrochrome inventory stood at 42 523 tonnes as at 31 December 2008, with both furnaces having been powered down to 60% capacity in mid-November, and then switched off and put on care and maintenance nine days later.
It also pointed out that all major capital projects had been deferred. The company was using the plant shutdown period to undertake maintenance of the plant and an upgrade of certain elements to expand the operational performance when production was resumed. The total capital spend – including furnace maintenance for the remainder of FY2009 – would be approximately R100 million. The capacity improvements include the expansion of the feed bins to provide greater input flexibility, a redesign of the feed chutes to reduce maintenance, and a modification to the pressure rings to allow greater energy input into the furnaces.
Commenting on the operational update, chief executive David Kovarsky said: “While we are naturally disappointed by the dramatic collapse in ferrochrome demand resulting from the global economic crisis, the board is pleased with the management’s swift response to both the situation and the inherent operational challenges. We are confident that when demand returns, low cost producers like IFL will be rewarded.”
During the half year the global ferrochrome industry experienced an unprecedented sharp reduction of demand that led the South African industry to cut production by about 85% with the likelihood of further reductions. To date, global ferrochrome production has been cut by approximately 70%.
The reduction of demand was exacerbated in South Africa by the power cuts in January 2008 that led to stainless steel producers building significant ferrochrome inventories over the first half of the calendar year in anticipation of supply shortages.
The 2009 first quarter price negotiations have not been concluded but it is widely accepted that there will be a sharp drop from the 2008 fourth quarter price of US$1.85 per pound.