Ferrochrome is a vital ingredient in making stainless steel, with lesser volumes used to make glass.
Core Consultants ferrochrome expert Lara Smith told Summit TV last week that producers of stainless steel are now holding their breath as the world metals markets seems to be experiencing a slight slump, and stocks of base metals pile up. Smith said South African producers have cut production drastically for the third quarter of 2011. Stainless steel demand is dependent on the health of the global economy – with the global economic crisis prices dipped by around 60% year-on-year after the highs of 2008 – but prices then came back as demand recovered.
Ferrochrome prices dropped again after February 2011 when Smith forecast US$1.33 per pound for ferrochrome the market in a supply deficit at that time, but she did not believe prices would now drop to 2009 levels again.Industry margins have suffered with the cost of production having gone up by around 11% last year, most South African producers experiencing cost increases of 8% to 10%.
Smith said the market would see lower prices over the next two years as the world waits for Europe to recover its current sovereign debt problems, but prices would stay around US$1.24 per pound over the medium term.