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South Africa’s ferrochrome producers turning to rivals

Keywords: Tags  ferrochrome, ferrochrome production, South Africa producers, Eskom, Ruukki, Hernic, Janie Davies

LONDON — South African ferrochrome producers seeking to extend power buyback agreements with state power group Eskom Holdings SOC Ltd. are approaching rivals for material to ensure their supply contracts are covered, market participants told AMM sister publication Metal Bulletin.

All South African producers have cut production and sold the conserved power back to Eskom in the latest round of power buyback deals reached in late 2012.

Ruukki SA and Hernic Ferrochrome Ltd. are reportedly seeking material so that they will be in a position to extend the furnace closures or cut additional capacity, market sources said.

"Ruukki and Hernic are trying to purchase the shortage (the capacity they would cut) from the market to close furnaces," one market source said.

International Ferro Metals Ltd. was said to be doing the same, but a company spokeswoman told Metal Bulletin it was "not considering shutting another furnace."

Most of the existing buyback arrangements expire in March, but several producers want to extend the arrangements until the end of May and some are stocking up first.

Under the terms of the Eskom deals, producers must fulfill contractual obligations and must not declare force majeure or cut jobs as a result of the cutbacks.

"I can confirm that (some producers) have approached us for material to cover their long-term sales contracts so they can sell the power instead," one ferrochrome supplier said.

Metal Bulletin reported in January that Eskom was seeking to buy back more power amid protracted concerns about a lack of generating capacity, which has already led to blackouts in South Africa in recent months.

Xstrata Alloys confirmed March 1 that it is in discussions with Eskom to extend its deal until the end of May.

Xstrata and joint-venture partner Merafe Resources Ltd. agreed in December to cut ferrochrome production by 100,000 tonnes from Jan. 1 through March 31, 2013.

"The Xstrata-Merafe (pooling and sharing venture) is in discussions with Eskom to extend the current buyback deal to the end of May. We do not know at the moment how many of our furnaces will be affected," an Xstrata Alloys spokesman said.

Ruukki and Hernic declined to comment.

A version of this article was first published by AMM sister publication Metal Bulletin.

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