CAPE TOWN, South Africa
Ferrochrome consumers are nervous about South Africas
tightening supply after the countrys producers cut output
under electricity buyback deals, International Ferro Metals
Ltd. chief executive officer Chris Jordaan said on the
sidelines of Mining Indaba in Cape Town.
South Africas ferrochrome
producers all struck deals recently to cut production and sell
the conserved power back to state-run power provider Eskom
Holdings SOC Ltd., leading to tighter spot ferrochrome supplies
from the country (
amm.com, Jan. 24).
Eskom made similar deals in
2012, leading to tighter supplies and higher prices in the
first half of the year.
"There is a high probability
spot alloy will be tight. To a large extent spot seems to be in
short supply, which is contributing to the consumers being a
little on edge," Jordaan told AMM sister publication
Metal Bulletin. "Estimates are that more alloy was
taken out of the market under the Eskom deals than it was this
time last year. The surprise was that nobody was really
expecting Eskom to buy back power again."
Under the Eskom deals, producers
are required to fulfill all contractual obligations and must
not cut jobs or declare force majeure as a result of
Macquarie Group Ltd. estimates
that total output could be reduced by 300,000 to 350,000
tonnesabout 3 to 4 percent of annual global
outputdue to the buyback deals.
Low stocks and increased demand
from China are likely to contribute to the producers case
for a rise in the second-quarter benchmark price for
ferrochrome, Jordaan said. "I think the benchmark price is
under pressure to increase. Two things will put pressure on
itlow stocks of both ores and alloys, and also the growth
seen in China."
The first-quarter benchmark
price for ferrochrome settled at 112.5 cents per pound.
AMMs low-carbon ferrochrome prices have moved up
to $2.23 to $2.26 per pound from $2.23 to $2.25 previously,
while high-carbon ferrochrome is between $1 and $1.04 per pound
amm.com, Feb. 1).
A version of this article was first published by AMM sister
publication Metal Bulletin.