World's largest ferrochrome producer cuts back sharply
The Xstrata-Merafe Chrome Venture cuts out a third of 2009 production on weak demand.

Author: Tessa Kruger
Posted:  Monday , 10 Nov 2008

JOHANNESBURG  - 

The Xstrata-Merafe Chrome Venture's decision today to shut down six ferrochrome furnaces comes as the company expects demand from steelmakers to remain weak into the first half of next year.

Spokesperson for Merafe Resources Lindiwe Montshiwagae said today the impact of the closure on the Venture's revenue would not be significant this year as a strong rand would mitigate the effect of the 80,000 tonne production cut.

Montshiwagae said the company will cut its current annual production of 1.5  to 1 million tonnes in 2009 as steelmakers have indicated that demand for ferrochrome has weakened.

The large production cut in 2009 would impact negatively on revenue, but an estimate could only be given once the rand dollar exchange rate and ferrochrome prices were known.

"Large steelmakers have announced major production cuts which feed through to demand for ferrochrome and have indicated that they can't obtain credit to buy ferrochrome in the current economic environment," said Montshiwagae.

"Merafe has not seen demand for ferrochrome picking up in the beginning of the fourth quarter after an expected slow third quarter. But the company believes the outlook for ferrochrome is still positive as urbanisation in China is not stopping, it's only slowing down."

Global demand for ferrochrome is between 6.5-7 million tonnes annually, according to Merafe. The company expected the market to be in surplus this year as some ferrochrome producers have not cut back production yet.

The Venture announced today that three furnaces at Rustenburg, two at Lydenburg and one at Wonderkop would remain suspended until further notice.

Montshiwagae said the company was keeping a close eye on market conditions and could get a furnace back to normal production within four to six weeks.

The Xstrata-Merafe Chrome Venture is the world's largest producer of ferrochrome and supplies over 20% of the world's ferrochrome requirements.