Ferrochrome

摘要

Following last month's negotiations, South African ferrochrome producers and European stainless mills have settled the contract price for the second quarter of 2006 at 70.25 cents/lb, some 7.25 cents/lb higher than the first quarter price. After falls of 5 cents/1b for three consecutive quarters, the increase in the contract price is the first for a year and enables South African producers to regain some lost ground. The recovery in both spot and contract prices last month was driven by a continued improvement in demand from the stainless steel sector and a reduction in the availability of ferrochrome, as South African producers maintained their output restrictions. The outcome of the contract negotiations represents a compromise between the stainless mills and the ferrochrome producers, as the latter have become increasingly concerned with higher dollar operating costs in recent months. The rand has appreciated steadily from an average of R6.65 against the dollar in November 2005 to an average of R6.15 during the first three months of 2006 and South African producers had been hoping to secure an increase in contract prices of up to 10 cents/1b in order to offset the rise in production costs. However, the contract price of 70.25 cents/1b is still a historically high figure and the recent improvement in spot prices has helped to relieve the pressure on producers' profit margins.