[miningmx.com] — INTERNATIONAL Ferro Metals (IFM) said sales of ferrochrome more than doubled in its second quarter on strong Asian demand for the stainless steel ingredient.
Sales of ferrochrome surged to 74,917 tonnes, from 34,553 tonnes in the year-earlier quarter, reducing the miner’s inventories to more normal levels, it said.
“IFL achieved strong sales during the quarter due to our good relationships in Asia where we have focussed on higher-value markets,” said CEO David Kovarsky.
“Production at our mines, underground and surface, is also approaching record levels and IFL should be self-sufficient in ore supply by January 2012,” he added.
The company warned last week that production for the second quarter to end December was below its maximum capacity, after the ferrochrome producer was forced to shut down operations at its two key furnaces for repairs.
IFM said a review of its furnaces shows that more work, including a replacement of the roof panels, is required. The ferrochrome producer estimates the total cost of this work to come to R40m per furnace and to require a six-week shutdown per furnace.
Work is expected to start in June or July, depending on when the equipment can be fabricated, and the furnaces will operate at around 18,000 tonnes a month until then. Kovarsky told Reuters that capacity will rise to about 265,000 tonnes a year, or around 22,000 tonnes a month, once the work is completed.
Shares in the London-listed company were up 2.5% during early morning trade, after earlier trading near a two-year low.
“Results are in line with our expectations, having recently downgraded our production forecast for 2H’11 from 120,000 tonnes to 95,000 tonnes to reflect ongoing furnace issues,” said Liberum Capital.
IFM has produced 100,839 tonnes in the first half.
On Tuesday, IFM said construction of a retreatment plant by mining rival Anglo Platinum was six months behind schedule and that it expects to get the first feed of chrome concentrate in January, a further delay to last week’s update.
FERROCHROME PRICES
Kovarsky told Reuters that he expects the European contract price of ferrochrome to rise from the $1.25 per pound settlement price in the first quarter of 2011.
“I’m cautiously optimistic for the next quarter,” he said, noting higher stainless steel prices in China.
He added that costs are going to be under pressure as rising coking coal prices due to the flooding in Australia might permeate into the ferrochrome cost, although he sees this increasing the selling price of ferrochrome as well. The strong rand has also impacted South African producers.
“We estimate every 10c/lb move in the chrome price is equivalent to 3p of earnings for IFM giving it the best gearing to rises in ferrochrome prices in the sector,” Liberum said.
IFM said Chinese stainless steel production, which is accounting for 37.5% of global output, is showing strong growth as are Taiwan and South Korea, but that growth in Europe, which represents 23% of global production is sluggish.
