HIGH-GRADE NI-CU-PT-PD-ZN-CR-AU-V-TI DISCOVERIES IN THE "RING OF FIRE"
NI 43-101 Update (September 2012): 11.1 Mt @ 1.68% Ni, 0.87% Cu, 0.89 gpt Pt and 3.09 gpt Pd and 0.18 gpt Au (Proven & Probable Reserves) / 8.9 Mt @ 1.10% Ni, 1.14% Cu, 1.16 gpt Pt and 3.49 gpt Pd and 0.30 gpt Au (Inferred Resource)
Message: FeCr's Dual Pricing Stirs Benchmark System (Part 1)
| FeCr's Dual Pricing Stirs Benchmark System (Part 1) |
| = As a result, ESKOM's power buyback revealed growing fragility of the system = |
| The long negotiations for the benchmark price applicable to the shipments of charge chrome to Europe during the Q2 (April - June) recently ended with an increase by US¢20/lb Cr, which was a result of European stainless steel mills' compromise to accept most of the proposed raise of US¢22 - 25/lb Cr by the South African sellers based on the forecasted lower supply of charge chrome during the quarter caused by ESKOM's power buyback program. Consequently the new benchmark price for Europe rose to US¢135/lb Cr. It is said that the buyers including Japanese and Korean stainless steel mills came to the negotiation table this time with a sense of crisis over the benchmark system, as the mills were feeling that the basic spirit of the long-lasted system was being wavered - a basic spirit that the producers and the consumers establish a benchmark price by cooperating with each other to reasonably determine a price on a quarterly basis for stable ferrochrome supply and, at the same time, to ensure healthy growth of the producers. Although the system has been basically working until today, its spirit was apparently shaken especially during the discussion in the negotiations. One of the reasons behind the sense of crisis was the dual pricing i.e. one in Europe/Japan/Korea and the other in China. The Q2 (April - June) benchmark was agreed to raise it by US¢20/lb Cr by the Europeans to US¢135/lb Cr, while the ferrochrome price in China for April deliveries declined to meet the request from the mills, to US¢95 - 96/lb Cr without VAT. The ferrochrome prices do not synchronize between China and the rest of the world, obviously causing the sense of crisis about the benchmark system's future, especially under the current situation that more nad more stainless steel products of Chinese origin are exported to Italy and to other European markets. With regard to ESKOM's power buyback policy, which is often criticized as too sweet for the smelters by power consumers of other industries, details of the buybacks have not been disclosed, but analysts guess that the price of buying back the power is more or less the same as the power tariff in winter that is reportedly some 60% higher than in regular seasons. By now 6 South African ferrochrome smelters accepted ESKOM's proposal and temporarily ceased operation in March at some of their furnaces until the end of May. The number of the furnaces left idle until end-May is 23 so far, almost a half of 50 in South Africa. Aggregate of lost production of ferrochrome during the 3-month period (March to end-May) is estimated 240,000 - 250,000 tons. Xstrata-Merafe, the biggest producer in South Africa holding a share of 40% in the country, will eventually cut output by 130,000 tons. Although the volume being lost is sizable, the smelters had a good reason to choose it rather than continuing operations in deficit. According to the data released by ICDA, ferrochrome output in South Africa during the first half of 2010 (the data during 2011 have not been released yet) was 1,800,000 tons i.e. 880,000 tons in the Q1 and 920,000 tons in the Q2. The production loss this time is almost equivalent to one-month production. The impact of the forecasted loss in South Africa is substantial for the traditional buyers, i.e. stainless steel mills in Europe, Japan and Korea. The power buyback is scheduled to end at the end of May, after which each smelter will be free to resume production anytime but under the high winter power rates. In the past years, smelters basically chose to curtail production in the winter time to avoid the high power rates, for example in 2010, South African ferrochrome output in the Q3 (July - September) was 768,000 tons, down by about 17% from the preceding quarter's 920,000 tons. However, this year could be a bit different. There may be some smelters who will choose to resume operations even by paying the high winter tariffs as supplies are expected very thin after the 3-month curtailment, in order to, taking the opportunity, improve cash-flow. - to be continued to Part 2 - |
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last modified : Fri 20 Apr, 2012 [10:07] http://www.texreport.co.jp/xenglish/eng-genryou/201204/201204171004Tue-4.html |
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