Ferrochrome catches fire

Expectations are running high for ferrochrome sellers and they have been successful in pushing prices higher, albeit, for smaller tonnages. In the US, high-carbon ferrochrome was consistently sold for over $1.30 per lb, with some higher, low-purity grades breaching the $1.40 level. A major US stainless mill appears to be running flat out and can’t find enough scrap or fines and has started to buy lumpy—not itsusual practice.

Even in Europe, high-carbon prices moved closer to the$1.30 level and up to $1.34, ddp. High-carbon fines were booked at $1.09. “I expected prices to firm, but not thisquickly,” one buyer said. “All I hope is that I can pass themalong.”

Charge chrome prices started to move though a major South African producer sold around 13,000 mt to China at $1.06-1.09, ex warehouse. European charge chrome buyers were paying over $1.10 in warehouse and two large stainlessmills were out for material for second-quarter delivery.

US chromium metal and 0.10% C low-carbon prices werehigher in the US.

The incumbent supplier is fighting to keep its long-term contract with a major US mill. The seller reportedly not only offered to increase its discount to double-digit levels fromsingle digits, but is reportedly offering to make the new contract retroactive to 2011 instead of 2012. The mill, which usually buys about 100,000 mtpy of ferrochrome, is reportedly obligated to make more than 50% under a take-or-pay agreement but can buy the remainder on the spot market ifprices are more competitive. The mill is now thought to belooking for a five-year rather than a three-year agreement.

IFM reportedly is having more furnace problems and may have to take down one of its two furnaces for a prolonged shutdown before its planned June date. Shareholders fear thecompany might have to seek further financing, with JICSO, the largest shareholder, the likely candidate.

Chinese major stainless mills last week increased their tender prices for March purchases of high-carbon ferrochrome. Baosteel set its tender price at 9,500 yuan per mt, ddp, ($1.11per lb VAT unpaid) up 600 yuan, or 6.7% compared withFebruary. Meanwhile, TISCO has increased its tender priceto 9,400 yuan ($1.10), up 500 yuan or 5.6% from February.

Prices for high-grade chrome ore in China were higher lastweek, but Chinese smelters are taking less lower qualitymaterial and that is putting pricing pressure on those grades. The smelters blend the high grade ore with lesser grades.

The possible site that Cliffs has picked in Sudbury, Ont., isconsidered a brownfield location that could spare it some environmental problems. It seems that the various municipalitiesin Ontario are lining up to get the proposed smelter, especially since it will create high paying jobs. Officials in Ontario areafraid that the smelter could be built in Quebec because of  lower power prices, while other Canadian provinces are alsovying for the plant. “It has a great deal more public and government support than I thought,” one analyst said. “It onlyshows how important mining and smelting are to the Canadians. Unlike the US, they want the smelter and mine.”

Xstrata continued its policy of not disclosing its ferrochrome sales even though it releases sales for all its other commodities. Xstrata also continued to combine ferrochrome with vanadium in its Alloys division for financial reporting. During 2010, Xstrata’s ferroalloys division reported an operating profit of $313-million, primarily dueto an average 46% increase in the average ferrochrome sales price.

Bulk earthworks will start on the second, 360,000-mtpyexpansion phase at Xstrata’s Lion smelter complex this quarter and commissioning is planned for the first half of 2013. An agreement was concluded with Lonmin to increase andextend the current UG2 offtake agreement from tailings atLonmin’s Marikana operations. The tailings will be treatedthrough chromite recovery plants that will be built, ownedand operated by the Xstrata-Merafe chrome venture. TotalUG2 supply sourced through this deal agreement will amount to approximately 1.5-million mtpy.

The new 600,000-mtpy pelletizing and sintering plant atRustenburg, Project Tswelopele, is expected to be fully operational in 2013. The plant will agglomerate some of the additional UG2 from the Lonmin operations.

The Horizon mine development remains on schedule toreach a production capacity of 40,000 mtpm by the end of 2013. Production at Waterval mine will start at the end of the first quarter of 2011, producing an average of 30,000 mtpmfrom available mineable panels.