Ferrochrome stocks to shrink by end-2009
Ines Schumacher
Posted: Mon, 23 Feb 2009
[miningmx.com] -- Ferrochrome producer International Ferro Metals Limited (IFM) said ferrochrome inventories could normalise towards the end of 2009 due to most stainless steel producers holding low stocks, which means it might be able to resume production.


"With our current cash position, we can sit it out for another 12 to 18 months," David Kovarsky, IFM CEO told Miningmx.

"We don't intend to restart the furnaces until we receive enough orders at the right prices to give us a clear indication of a market recovery," he said.
we can sit it out for another 12 to 18 months
It will take four weeks for the furnaces to reach full production. It will take three months for its underground mines to resume steady state output. There are six months worth of ore stockpiled, which takes the pressure off the mining side once the decision is taken to restart the two suspended furnaces.

“The dramatic reduction in global ferrochrome supply leads industry commentators to estimate that industry stocks should reduce from 22 weeks to 8 weeks of consumption by calendar year end,” said IFM in its results statement for the six months to end-December.

IFM reported a loss before tax of R26.8m, compared to a profit before tax of R654m for the six months ended 30 June 2008.


The significant decline in profit compared to the June 2008 half is attributable to the unprecedented sharp reduction in global ferrochrome demand and the resulting low prices experienced over the last quarter of calendar 2008,” IFM said.

The ferrochrome price has fallen from $1.92 per pound in the June quarter of 2008 to $0.79 per pound in the March quarter of 2009. Approximately 72% of world ferrochrome production has been suspended as at 31 January 2009.

Both of IFM’s South African furnaces were switched off on 25 November 2008 and IFM focused on selling its inventory. IFM “incurred significant price reductions and writedowns of inventories over the December half”.

Inventory level as at 31 January 2009 was 33,338 tonnes, compared to 42,523 tonnes as at 31 December 2008.

IFM’s furnaces are currently undergoing maintenance and are expected to be available to restart production from 1 April, depending on market conditions.

"The company's furnaces remain idle, but the business is well equipped to deal with a sustained downturn in ferrochrome demand thanks to the strength of its balance sheet," said Numis Securities in a note.

IFM has cash and cash equivalents of R703m and is expecting this to strengthen with expected cash receipt of all outstanding receivables by mid-March 2009.

The world's largest supplier of ferrochrome, Xstrata, has cut its ferrochrome production by 80% because of market conditions.

IFM has indirectly laid off 550 workers employed by contractors at its operations.

FYI

Posted on another board and may not pertain to us right now but is nice to know info.

Coop