As we indicated in the Stainless Steel section of this month's monitor, the fourth quarter of this year is not likely to experience strong growth in stainless melted production. However, there are several other factors that may support further rises in the contract price in the first quarter of 2004, despite the current weakening of spot prices. Firstly, the availability of scrap has remained tight for almost a year. Despite the recent climb in the nickel prices, scrap availability has not eased and customers who have a requirement for this material are still having to pay high prices in order to obtain it. Consequently, the demand for virgin chrome units has remained well supported. Secondly, the appreciation of the Rand has been a key factor behind the South African producers argument for large increments in contract prices. At the current level of around ZAR6.90 to the US dollar, the rand has appreciated by over 23 percent since the start of the year. This has inevitably increased dollar denominated costs of production for all South African ferrochrome producers. In addition to these factors, low stock levels have also contributed to price increments over the last 18 months. By the end of Q4 2003 we estimate that western world stocks of high carbon ferrochrome will account for less than eight weeks of consumption.
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