Ferrochrome prices seen rising 10 pct higher in Q411:25 GMT

Tag : Steel Stainless

By James Macharia
JOHANNESBURG (Reuters) - South African ferrochrome producer Hernicsaid on Tuesday it expects prices for the metal to rise more than10 percent in the fourth quarter.
Benchmark ferrochrome prices, rose in Europe by 6.8 percent for thethird quarter, to a record level of $2.05 per pound, up from $1.92per pound in the second quarter of 2008. Analysts had hoped for ajump of 15-20 percent to $2.20-$2.30/lb.
South Africa is the world's biggest ferro-chrome producer, which ismainly used as an alloy in stainless steel to prevent corrosion,and has more than 72 percent of the world's chrome ore reserves.
Jasper Pieters, operations director at Hernic Ferrochrome, toldReuters on the sidelines of the ferro alloys meeting inJohannesburg that input prices were soaring, and ferrochrome mayfollow suit.
"We see almost a monthly increase in various input costs. Fuel,coking coal, coal, mining costs," he said.
"I see ferrochrome prices increasing more than 10 percent, orhigher depending on the input costs."
Hernic Ferrochrome is majority owned by Japan's MitsubishiCorporation.
Dankor Konchar, chairman of South Africa's privately owned SamancorChrome, the world's second-biggest producer of ferrochrome, saidprices might rise further.
"Prices have yet to peak," Konchar said on the sidelines of themeeting.
"On the one hand you have an increase in costs of electricity,coking coal, coal, fuel, everything and on the other hand I see ashortage of ferrochrome in Q4," he said.
"I can say how much percentage the prices could rise, but let'stalk at the start of September, let's see the spot price then,after everyone comes back from holidays."
South Africa's Merafe Resources Chief Executive Officer, StevePhiri, said he saw "strong prices" for ferrochrome in the next fewyears, owing to the country's power crunch.
The power crisis meant output would decline by 5-10 percentannually until 2012, when adequate power is expected to have beeninstalled, and that world supply would be constrained.
"We can celebrate prices being artificially strong owing to theoutput declines, but this will be an artificial price rise," hetold delegates at a metal conference.
Phiri said he could not give an exact forecast as his firm was in aclosed period.
LONG TERM
For the longer term, ferrochrome prices were seen rising.
"I think I agree with some of the analysts who say for the longterm, even beyond Q4, the curve will trend higher. It may fluctuatein between, but with output hiccups, we shall see prices peaking infuture," Somdeb Banerjee, managing director at Tata Steel SouthAfrica, a unit of India's Tata Group, said.
Prices of ferrochrome surged by 60 percent in the second quarter onthe back of power shortages and subsequent production shortfalls inSouth Africa, the world's biggest producer.
Ferrochrome is supplied to European steel groups such asArcelorMittal and ThyssenKrupp by South African producers includingSamancor and Xstrata.
Merafe said in March the outlook for ferrochrome prices in 2008 waspositive, with demand forecast to rise about 9 percent.
A supply-side constraints on South African producers because of thepower outages and rationing were expected to result in a supplydeficit this year. The country's ferrochrome producers arereceiving 90 percent of their normal power needs, hurting outputand slowing down expansion plans.