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Gilbert Lobo
Mumbai: The South African charge chrome/ferro chrome producers have won a US 3 cents per lb increase in prices for supply to Europe, Japan during July-September 99 taking the price to 40 cents per lb CIF. The producers were hoping for 6 cents increase but have won only 50 per cent of what they demanded. The producers feel that they may get another 6 cents increase during the October December 99 period as prices had crashed to historically low levels during the last 12 months.
The price increase has no any impact on the Chinese producers as yet who are said to be selling around 33 to 35 cents fob China. But the present prices are not attractive even for the Chinese and imports of chrome ore into China declined to around 7,00,000 tonnes during 1998 against over 1 million tonnes during the previous years. This slump had also affected Indian exporters of chrome ore to China which is the main market for Indian chrome ore.
The Kazakh producers are reportedly asking for 7 to 8 cents increase and may settle forless and kill any price increase. Therefore Chinese are likely to be cautious in demanding a large increase. Indian material is said to be at 36 cents lb cif Busan.
Indian exporters of charge chrome ferro chrome have increased in number, particularly from Andhra, as they are getting NTPC power at a lower rate and have an export obligation which is nowadays being monitored strictly by NTPC.If there is shortfall in export obligation the units are required to pay a penal rate, which can put them out of business. However the ferro chrome charge chrome business is not profitable at current prices for Indian producers and unless the international prices rise to 50 to 55 cents most of the producer/exporters will find it loss making.
GMR Vasavi has survived, and made profits even in bad years, because it has been able to tie cheaper power through NTPC as also through the Andhra Pradesh Gas Corporation. GMR is now putting up a cogeneration power plant based on the sugar mill waste products bagasse and should beable to get 6 Mw of power. But according to a spokesman of GMR Vasavi ferro chrome is not an attractive business any more, nor that matter any ferro alloy considering the high cost of power in India.
GMR Vasavi is trying to move into sugar, beer and other consumer oriented commodities when the going is good. It is also closing one of its two furnaces for extended period for relining. Export of high carbon ferro chrome is continuing despite low world prices thanks to NTPC power which is available for units in Andhra and Orissa.
Thanks to this power, the producers undertake an export obligation and try and sell their product abroad and also cater to the local market and keep themselves Thus from Andhra apart from GMR Vasavi, there are Nava Bharat, VBC, Andhra Ferro and Jindal strips and FACOR who export ferro chrome in fairly large quantities.
World stainless steel production is likely to increase by 4 to 5 per cent during 1999-2000 and this may translate into an extra demand for 200,000 tonnes of ferrochrome in the world market. Since there is surplus capacity in industry unless the South African producers cut down on production, there cannot be any large increase in world prices., pessimist assert. South African producers are in profit even at the current level of low prices and they have tried to cut down their costs by energy conservation, better recovery of metal and improvement in raw material feed.
They have been able to put out a number of world producers of ferro chrome out of business and it may be time for them to push up the prices by curtailing production, as the list of competitors is falling.Local prices of ferro chrome after hitting low of Rs 21,000 rose to Rs 22,000 and have now climbed back to Rs 23,000 per tonne and the producers are keen to keep it the level. The situation is helped by closure of FACOR's Garividi unit which was a major supplier of high carbon ferro chrome market in the local market. GMR Vasavi also has curtailed production of ferro chrome and units like Nava Bharatand VBC are busy producing ferro crhome on conversion basis for Tatas. for export. Their other furnaces are being used for silico manganese and ferro silicon thus restricting the supply of ferro chrome in the local market. Imports of high carbon ferro chrome will also be discouraged due to rupee depreciation , fairly high import duties and the present rise in world ferro chrome prices. If the world price rise is maintained which most people feel will last through the next few months, a recovery of mild proportions is in the offing for high carbon ferro chrome producers in India.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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