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Ferrochrome prices to be flat until 2013, then strengthening - 17 February 2012

Based on a 4% annual increase in stainless steel production, global demand for ferrochrome (FeCr) will hit 11m tonnes in 2015. But the market will remain oversupplied for the next four years, keeping FeCr prices flat until 2013, after which they should strengthen as the demand-supply gap begins to close, according to Laura Smith, an analyst with South Africa’s Core Consultants.

Stainless steel demand in 2012 is forecast to grow 3% year-on-year, with China the main driver, resulting in global consumption of 27.8mt. However in the European market, where stainless consumption in Q4 2011 plummeted by 41% y-o-y, will remain weak as buyers are cautious and vehicle manufacturing is underperforming, Smith told the Metal Pages Ferro-Alloys Global Markets conference in Dubai this week attended by Steel Business Briefing.

South Africa, the world’s leading FeCr producer, is forecast to increase output 15% this quarter over Q4 2011. Producers will then look to cut capacity utilisation at the end of March, SBB heard.

South Africa will lead the way in production investments up to 2015, with 656,000 tonnes/year of new capacity (30% growth) planned in this period. Zimbabwe simultaneously plans to add 450,000t/y of new capacity, bringing global FeCr capacity to 14m t/y.

However, South Africa’s industry could come under threat if proposals for a new carbon emissions tax materialise. “Were this to happen, it would cost the sector ZAR 16.8bn ($2.16bn) and could nullify the country’s FeCr production,” Smith told the meeting.

Core Consultants anticipates FeCr prices will average $1.20-1.23/lb until 2013, reaching $1.32/lb by 2015.


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