At the beginning of 2003 there can have been few people who would have successfully predicted the remarkable ascent of the South African rand on international currency markets. So steep has been the appreciation of South Africa's currency against the dollar, in particular, that from a level of R8.52:1 US dollar at the beginning of the year, the rand: dollar rate has averaged almost R6.97: 1 US dollar in October - a level last seen in mid-2000. With Asian central bankers intervening massively in financial markets in a bid to prevent their own currencies strengthening too sharply, alternative investment channels such as the euro and rand have felt the full force of currency speculators. For South Africa's ferro-chrome producers the strong rand has had the effect of squeezing profits at many of the country's operations, despite the fact that around 9 cents/lb has been added to quarterly charge chrome contract prices during the second half of 2003. Whether currency fluctuations have all but wiped out any gains made in contract pricing remains to be seen, clearly though, their effects on the bottom line have been hugely significant. This fact has not gone unnoticed by South Africa's chrome producers, who again intend to use the strong currency as the primary method of leveraging higher prices out of stainless mills, when negotiations for first-quarter deliveries begin shortly. Should the rand: dollar rate not lose ground during the next month or so, the chances are that most first-quarter contracts will be settled in excess of 50 cents/lb. However, with conversion margins at stainless mills under constant pressure, higher raw material prices are not something they will readily agree to and another round of tough negotiations looms large on the horizon.
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