21 February 2011
High-carbon ferro-chrome prices rose five cents on Friday amid strong demand and as market participants continued to debate the prospects for a higher benchmark price for charge chrome in the second quarter.
Material traded at $1.30-1.40 per tonne, compared with $1.25-1.35 per tonne on February 11 when prices gained five cents after holding since November 5.
Deals representing several hundred tonnes of business were reported to MB all the way across the trading range.
Rising spot prices in the first quarter have led producer hopes for a double digit hike in the quarterly benchmark, with some predicting an increase to as much as $1.50 per tonne, compared with the last settlement of $1.25 per tonne.
South African producers need a increase in order to justify their cost of production, as they contend with rising power and raw material costs and competition from China, some sources warned.
“If the Europeans don’t accept it, the largest South African producers will just stop and that will be playing straight into the hands of the Chinese,” a market participant told MB.
The first quarter settlement fell five cents from the fourth quarter of 2010 despite hopes for a rollover.
Stainless steel makers had initially said they appreciated the South African ferro-chrome producers’ position, but an influx of cheap South African material into China undermined calls for a rise.
Those sales have now come to an end, further bolstering producer hopes, sources told MB.
But while a double digit rise is a reasonable expectation, an increase to $1.50 per tonne is far from guaranteed, according to one analyst.
“I’d be very surprised if we don’t see a rise, possibly a double digit rise, but to be asking for a 25 cent rise is very aggressive,” the analyst told MB.
“It’s the sort of number you might imagine the producers pitching as an opening number to negotiations. For the next quarterly, it’s going to be more about the units needed for stainless steel, and I think that balance will be tighter,” the analyst added.
South African consultancy and research firm Core Consultants expects the benchmark price to rise steadily to $1.33 per tonne by the fourth quarter and expects the market to remain in balance throughout 2011, md Lara Smith told delegates at the 2011 Investing in African Mining Indaba in Cape Town on February 10.
Smith estimates average South African production costs at 89-92 cents per lb, she said.
Meanwhile, Turkish producer Eti Krom is forecasting ferro-chrome consumption of 9.5 million tonnes for 2011 and expects Chinese stainless steel production to reach 35 million tonnes, the company said on Friday.
“The benchmark will be adjusted to the spot market price levels following traditional settlement paths seen in the past. If the settlement would be reached today [Feb 18th] it would need to be aleady a double digit increase,” president and ceo Robert Yildirim said.
Xstrata Alloys saw an increase of $458 million in operating profit in 2010 thanks to a 46% rise in the average ferro-chrome benchmark, as production rose to 1.17 million tonnes from 786,000 tonnes in 2009, the company announced earlier this month.
Xstrata Alloys has employed a range of measures aimed at reducing its production costs, including the introduction of its proprietary Premus technology, the lowest power consumption of all ferro-chrome smelting technologies.
It is also investigating the feasibility of using electricity generated by its own power station.
Material traded at $1.30-1.40 per tonne, compared with $1.25-1.35 per tonne on February 11 when prices gained five cents after holding since November 5.
Deals representing several hundred tonnes of business were reported to MB all the way across the trading range.
Rising spot prices in the first quarter have led producer hopes for a double digit hike in the quarterly benchmark, with some predicting an increase to as much as $1.50 per tonne, compared with the last settlement of $1.25 per tonne.
South African producers need a increase in order to justify their cost of production, as they contend with rising power and raw material costs and competition from China, some sources warned.
“If the Europeans don’t accept it, the largest South African producers will just stop and that will be playing straight into the hands of the Chinese,” a market participant told MB.
The first quarter settlement fell five cents from the fourth quarter of 2010 despite hopes for a rollover.
Stainless steel makers had initially said they appreciated the South African ferro-chrome producers’ position, but an influx of cheap South African material into China undermined calls for a rise.
Those sales have now come to an end, further bolstering producer hopes, sources told MB.
But while a double digit rise is a reasonable expectation, an increase to $1.50 per tonne is far from guaranteed, according to one analyst.
“I’d be very surprised if we don’t see a rise, possibly a double digit rise, but to be asking for a 25 cent rise is very aggressive,” the analyst told MB.
“It’s the sort of number you might imagine the producers pitching as an opening number to negotiations. For the next quarterly, it’s going to be more about the units needed for stainless steel, and I think that balance will be tighter,” the analyst added.
South African consultancy and research firm Core Consultants expects the benchmark price to rise steadily to $1.33 per tonne by the fourth quarter and expects the market to remain in balance throughout 2011, md Lara Smith told delegates at the 2011 Investing in African Mining Indaba in Cape Town on February 10.
Smith estimates average South African production costs at 89-92 cents per lb, she said.
Meanwhile, Turkish producer Eti Krom is forecasting ferro-chrome consumption of 9.5 million tonnes for 2011 and expects Chinese stainless steel production to reach 35 million tonnes, the company said on Friday.
“The benchmark will be adjusted to the spot market price levels following traditional settlement paths seen in the past. If the settlement would be reached today [Feb 18th] it would need to be aleady a double digit increase,” president and ceo Robert Yildirim said.
Xstrata Alloys saw an increase of $458 million in operating profit in 2010 thanks to a 46% rise in the average ferro-chrome benchmark, as production rose to 1.17 million tonnes from 786,000 tonnes in 2009, the company announced earlier this month.
Xstrata Alloys has employed a range of measures aimed at reducing its production costs, including the introduction of its proprietary Premus technology, the lowest power consumption of all ferro-chrome smelting technologies.
It is also investigating the feasibility of using electricity generated by its own power station.
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