JOHANNESBURG (miningweekly.com) – Ferrochrome-producer International Ferro Metals (IFM) said on Tuesday it expected ferrochrome demand to strengthen over the next quarter, supported by an anticipated rise in stainless steel demand and seasonal production cuts by South African ferrochrome producers during past winter months.

IFM CEO David Kovarsky said that a combination of low global ferrochrome inventories and South African production cuts during the winter months when electricity tariffs were higher, would see the ferrochrome market stabilise.

IFM had reduced its ferrochrome stock levels to 17 976 t at the end of June 2010 from 22 748 t at the end of March 2010.

Kovarsky said that IFM could not fully realise the benefit from higher ferrochrome prices for its fourth quarter ended June 30, 2010, owing to lower production levels and delayed shipments resulting from a three-week strike at State-owned freight logistics group Transnet.

The ferrochrome industry saw a substantial price increase of 35c during the June-quarter to $1,36/lb.

However, IFM reported a 6% drop in production for the quarter to 51 331 t, compared with 54 394 t for the previous quarter. Its production for the year to June 30, amounted to 200 440 t, compared with 110 364 t for the previous financial year, when output was lower due to the global financial crisis.

"Since the reporting quarter, greater operational efficiencies have been achieved that should increase production levels, lower costs and will help us to meet future challenges," said Kovarsky.

He added that as of the beginning of July, the company's furnace production had significantly improved as a result of more consistent ore feed and more stable furnace conditions resulting from repairing a furnace roof.

Further, the furnaces were on track to approach nameplate capacity during the next quarter, subject to the company ramping-up to using its maximum electricity requirements.

Currently, electricity rationing was voluntary, but legislation was expected in the fourth quarter of the year, which would enforce supply constraints. Kovarsky noted that the company's electricity cogeneration plant would be commissioned in October and fully ramped up by the end of November.

Meanwhile, the company had also sourced ground penetrating radar (GPR) equipment to identify hanging wall conditions at its North West mines after a new safety directive was issued by South Africa's Department of Mineral Resources (DMR).

The DMR initially required amendments to IFM's mine plan through changes to the size of its bords and pillars, which suggested a materially reduced extraction rate.

However, it was later agreed that it would be suitable for the company to use the GPR technology and take remedial steps if required. Consequently, the company's mine plan had remained unchanged and any loss of production should therefore be immaterial.

IFM produces ferrochrome from a chromite ore body at Buffelsfontein in the North West province.