Stainless Steel Me

Benchmark prices for ferrochrome fell for a third consecutive quarter on lower demand from stainless steel producers for the raw material. Over 80% of FerroChrome is utilised  for stainless steel production.

Second-quarter European contract prices dropped 13 percent to 69 U.S. cents a pound, from 79 cents in the first quarter, Johannesburg-based Merafe Resources Ltd. said today in a statement distributed by the city’s stock exchange.

The decline was “mildly disappointing,” Liberum Capital analysts Michael Rawlinson, Nicholas Pickens and Dominic O’Kane said in an e-mailed report.

Merafe’s venture with Xstrata Plc is the world’s biggest ferrochrome producer and is operating at a fifth of capacity. The second-biggest supplier, Samancor Chrome Ltd., shut all of its production last year. The first-quarter price was 57 percent less than that agreed on for the fourth quarter.

“A lot of producers are not profitable at these levels,” Stuart Elliot, Merafe’s financial director, said by phone from Johannesburg today. Low prices and winter electricity tariffs in South Africa from June to August discourage more production and support Merafe’s view that stock levels may normalize by the third quarter, he said.

“There is a potential for a recovery of the ferrochrome market in the second half of this year but it could take till Q4,” John Meyer, an analyst at Fairfax IS in London, wrote in a note today. “Stainless steel markets need to improve and inventories need to be worked off.”

The price of Ferro Chrome has the biggest effect on ferritic grades of stainless, last year during shortages so massive price hikes for materials used in catering and domestic appliance markets mainly 430.

 As reported Bloomberg