South African Ferrochrome Capacity Shows Consistency

South Africa’s ferrochrome industry used 85% of its capacity in the first quarter, more or less in line with the fourth quarter of 2013, says consultancy services provider Core Consultants MD Lara Smith.

The company estimates that the first quarter realised 760 000 t in ferrochrome, slightly lower than the 773 000 t produced in the fourth quarter of last year.

“The main reason that fourth-quarter production exceeded this quarter’s was the higher order placement, as stainless steel mills had deferred their orders until the fourth quarter and production increased to meet that demand,” explains Smith.

Core Consultants’ ‘Quarterly Ferrochrome and Stainless Steel Trends Report’, published in March 2014, forecasts higher output this year and expects South African production to total 3.2-million tons for the year, compared with the 2.57-million tons realised in 2013.

The increase comes as a result of the commissioning of the Lion II smelter and the fact that State-owned power utility Eskom has indicated that any buy-backs will be for a short duration and will not materially affect output, as has been the case in recent years, says Smith.

Ferrochrome producer International Ferro Metals reported an increase of 1.3% year-on-year in the fourth quarter of last year to 58 621 t. This took 2013 production to 116 469 t, 5.8% higher than in 2012. The higher ferrochrome production was achieved as a result of the company being able to operate at full capacity, she adds.

Commodity trading and mining company GlencoreXstrata released its year-end results, indicating that ferrochrome production rose 32% year-on-year to 1.2-millon tons, owing to better use of smelters and the commissioning of the Tswelopele palletising plant.

Ferrochrome producer Tata Steel KwaZulu-Natal has indicated to Core Consultants that it is currently producing around 10 000 t monthly and expected output in the first quarter is around 28 000 t, compared with about 26 000 t produced in fourth quarter of last year.

Core Consultants’ report goes on to explain: “With respect to the potential for Eskom buy-backs, producers have disclosed that, while the grid is tight, Eskom has agreed not to engage in buy-backs in the way they have been doing in the past and, therefore, production will not be greatly affected.”

Eskom will give prior notice to ferrochrome producers when it intends to declare an ‘emergency’ blackout for 24 hours. It will then negotiate with its customers which plants will be down for a particular number of hours. As producers will have advanced warning, they will be able to use this downtime for ongoing maintenance, the report adds.

Smith highlights that it is expected that, even if they are down for a few hours, production could be made up by increasing operating capacities of their furnaces once they are operational again. Therefore, it is not expected that power cuts will result in the same level of reduced output as was the case in 2012 and 2013.

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