Carli Lourens I Bloomberg

ASA Metals, the Chinese venture that produces ferrochrome in South Africa, says talks to set first-
quarter prices will start later than normal because of poor demand that has forced rates down.

"There is no need to talk when there is no demand,” Ernest Ives, marketing manager at the Polokwane-based company said by telephone.

“First-quarter negotiations should have started by now.”

Xstrata plc and Samancor Chrom, the world’s biggest producers, cut output in South Africa last year as demand for the metal, used to make stainless steel, collapsed because of the global recession.

South Africa is the world’s biggest producer of ferrochrome. The European benchmark price fell 9,8% in the fourth quarter to $1,85/lb, the first drop since 2006.

"Spot high carbon ferrochrome prices are reported to be down by about 65% from July levels,” Fairfaxis said in a note. “There are still no signs of recovery in
the ferrochrome market.”

Prices may fall to $1/lb in the first quarter and to 80c/lb in the second, Deutsche Bank estimated in a January 9 report. Investec last month estimated the first-quarter price at
$1,05/lb.

ASA, operating at about 60% of its capacity, has been asked by customers to defer shipments from the fourth quarter last year to the first quarter, Ives said. Some have asked for
delays to the second quarter, Ives said.

Price Talks

Price talks may start “in the next few weeks,” Ives said.

Samancor chairperson Danko Konchar couldn’t immediately comment when contacted on his mobile phone. Xstrata South Africa spokeperson Songezo Zibi didn’t immediately return a message left on his mobile phone.

“Demand is definitely not anywhere near normal yet,” Ives said. “China is showing some signs of enquiries. We hope China will lead a recovery.”

Xstrata and Merafe Resources, joint operators of the world’s largest ferrochrome producer, extended output cuts to more than half of total capacity last month. Samancor said last

month it will shut all of its furnaces for two months or loger.

ASA Metals is a joint venture between Eastern Asia Metals Investment of China and the Limpopo Economic Development Enterprise of South Africa.

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