CSM - Consolidated Minerals

[Rimtalay]

Chrome ore,
it was an excellent production result for the March quarter and therefore on target to produce 250,000 tons. If we use the Dec ½ year report we have a production of 126,015 tons for a revenue of AUD$25.1 million = AUD$200/ton. In Mr Baxter’s March update and the March quarterly report he indicated a 6% increase in the FY07 revenue. Ie. AUD$200 x 6% = $212. If we use the production target of 250,000 x $212/ton we will have a total revenue of AUD $53 million.
WOW FY07 AUD $53 million for chrome ore
cash costs AUD$122.43 X 250,000 =$30.6 million
EBITDA =$22.4 million ( 1st half $9.8 million this was already a 42% increase)

 

[noirua]

Have you seen the Vote NO website
ConsMin currently has $187 million in other companies in shares JML,BCI,MTH,RDR,VML that is 83c per share before we start on 200,000 tons of nickel at US$23/lb. ($12 billion) There is 30 million ton of manganese as they upgrade the resources and reserves with the new discoveries. Chromite is at an all time high, and what about Mindy Mindy iron ore.
The bid will not pass without a price close to $3/share, we have some shareholders currently running all the numbers, I'll start posting them soon, once we get all the information, ConsMin could be looking at profit of $60 million FY07, thats a 10% return on investment on a share price of $2.67, that's almost unheard of.
Hundreds of shareholders have contacted the Vote NO website and all but one person will vote NO, and the one YES vote did not leave their ID,I'm sure it was a Company Stooge, like Blue Bay Diver on ASF.

Hi, I must take up a point with you in the value of investments held by Consmin. There is no way you can value these at full market quotes. Like Investment Trusts and Funds these trade at a discount to asset value, for very many reasons, and I would put the value nearer 70 cents than 83 cents.

Also, you just can't value nickel and manganese on the basis of it all being piled up ready for sale.

When you say profit for 2007 being £60 million, is this before tax, after tax - EBIT, EBITDA etc., ?? Which ever way, the return is not really as exceptional as you portray, just good.

I agree the offer is too low and the cash element should be raised by about 30 cents.

Good Luck in your fine efforts.

 

[Rimtalay]

NICKEL HIT ANOTHER RECORD US$24/lb overnight 4th May 07
Nickel May 04,13:24
Bid/Ask 23.9867 - 24.1228
Change +0.6660 +2.86%
Low/High 23.3207 - 24.1908

 

[Rimtalay]

CHROME ORE STILL INCREASING

We are now seeing reports that chromium is trying to get into the act. India's decision a few months back to add an export tax, and South Africa's clamp down on shipments of chromite ore, has forced China to scramble for supply. This had led to spotty shortages in Europe and North America, which in turn, has led to price increases.

 

[Rimtalay]

ConsMin sales and profit calculations - done by a group of shareholders
http://www.usail2.com/consolidated_stephen_thomas_garbage.htm
Shows a EBITDA of $113.66 million FY07
Final Dividend 8.25c/share minumum

 

[Rimtalay]

Battle Line For Sales Of Manganese Ore To China Becomes Abnormal
Tex report - subsciption issue-
= Spot Price Of Mn-Ore Has Risen To US$4.00 Per Mn 1% CIF, Anxiety For Shipments Of Ghanaian Ore
Spot price of manganese ore for China has risen steeply. It seems that the contract on high grade manganese ore ( with Mn 46 - 48% ) has been concluded at a higher price of US$4.00 per Mn 1% CIF China. The origin of this manganese ore is said as Australian ore.

The normal level of price for high grade manganese ore contracted with Chinese customers for shipments in April - June quarter of 2007 is in the range of US$3.70 - 3.80 CIF but these prices have risen to a considerable extent in comparison with US$2.80 - 3.00 CIF settled for shipments in January - March quarter of 2007.

On the other hand, Ghana has sold 584,000 tons of manganese ores for shipments to China in 2007 but an anxiety for shipments from Ghana has emerged. The buyer concerned said that Privat, having acquired the new ownership of manganese mine in Ghana ( Ghana Manganese Company ), notified the parties concerned to cancel the existing contracts. Therefore, the transitions to be seen hereafter are marked and a possibility to reduce the quantity of manganese ore to be exported from Ghana to China is not deniable, because Nikopol Ferro-Alloy Works of Ukraine, under management of Privat, is a major buyer of Ghanaian manganese ore ( imported 830,000 tons from Ghana in 2006 ).

The matter in question is that China imported 6,212,000 tons of manganese ore in 2006, which had a remarkable increase of 35% compared with that ( 4,580,000 tons ) imported in 2005. The averaged unit price of manganese ore imported into China in 2006 was US$104 per ton CIF as fallen from that ( US$149 ) in 2005. The reason, why the unit price of manganese ore imported into China in 2005 had risen to a nearer level to US$150 per ton CIF, was due to an aftereffect of the contracts concluded at a higher price than US$5.00 per Mn 1% CIF in 2004, when transactions to import manganese ore became a boom.

There is a strong possibility to materialize again an era of manganese ore in 2007 as recorded in 2004 to 2005. Namely, a tight supply of manganese ore is anticipated. As regards the world output of manganese ore in 2006, the production of high grade ore increased by 5% from that in 2005 but that of medium and low grade ores had a considerable decrease from that in 2005. Consequently, the total quantity of manganese ores produced in the world for 2006 came to 11.8 million tons ( on Mn content base ), having increased by only 2% compared to that for 2005. However, the world demand for manganese ore in 2006 increased by 4% from that in 2005 and this expansion of the demand complied with the world output of crude steel in 2006, which came to 1,314 million tons as increased by 3% compared to that in 2005.
As for the quantities of manganese ferro-alloys produced in the world for 2006, the production of silico-manganese increased by 17% and that of ferro-manganese also increased by 4 - 9% in comparison with those for 2005 and, in view of the matter which the world production of crude steel in 2007 is expected to continue a further expansion on a basic tone, the world demand for manganese is still in the direction to enlarge further. Therefore, the world demand for manganese ore in 2007 is anticipated to increase accordingly. On the other hand, by taking into account of price of US$5 per Mn 1% for manganese ore, the production of manganese ore in 2007 is supposed to turn to increase ( mainly to resume operations at idled manganese mines and to challenge again sales for exports ) but there is a big probability to arise a mismatch between supply and demand,

China is the country to face straightly a gap between decreasing supply and increasing demand. China produced 420 million tons of crude steel in 2006, having increased by 65 million tons from that in 2005, but is supposed to increase further their production of crude steel in 2007 by 50 - 60 million tons. Therefore, China will require more than 7 million tons per annum of manganese ore in 2007. The domestic production of manganese ore in China once reached a peak in 2005 but, after that, has inclined to decrease and the official data reported that the domestic production of manganese ore in 2006 had a decrease of 8% compared with that in 2005. Even the domestic production of manganese ore in China has arisen with a decline.

The quantity of manganese ore required by China in 2006 had an increase of approximately 20% on Mn content base but the demand for manganese ore from European countries and the USA in 2006 had a considerable decrease of more than 20%. Accordingly, an increase of the demand in China was offset by a decrease of the demand in the western countries and a margin to maintain a balance still existed. In addition, the accumulated stocks of manganese ore at wharfs ( supposedly more than one million tons ) caused by an excessive quantity of this ore imported into China in 2005 had functioned as a buffer for the sharply increased demand for manganese ore.

The price of manganese ore for China had still weakened in the first half of 2006 and that of medium grade ore ( including siliceous ore ) had been depressed to a level of US$2.20 - 2.30 per Mn 1% CIF China. In addition, ocean freight has risen steeply and, consequently, net price of manganese ore received by manganese mines was a loss for them. As a matter of fact, medium-class manganese mines in Australia suffered from a loss in their settlement of accounts for the first half of 2006.

When the supply and demand of manganese ore on a long run are looked over, the projects to increase production and to develop new mines are scarce. The projects to increase production of manganese ore have been restricted to the followings ; <> BHP Billiton's mine in Australia ( to increase from 3.20 million tons / year at present to 4.20 million tons / year in 2009 ), <> Eramet's mine in Gabon ( to produce 3.50 million tons / year in 2008 by an increase of 500,000 tons / year from that in 2006 ), <> Ghana Manganese Company's mine in Ghana ( to increase by 200,000 - 300,000 tons / year to 1.80 million tons / year in 2007 by means of improving the facilities at loading port ) and <> Local mine of northern territory in Australia launched to produce from autumn of 2006 ( on a scale of 500,000 tons / year ).

When price of manganese ore enters into an era of US$5 per Mn 1%, the Buritirama mine of Brazil ( to produce 500,000 - 600,000 tons / year ), having had once disappeared from the supply side in 2005 to 2006, has a possibility to resume the production but the quantity of manganese ore to be supplied by this Brazilian mine has been limited.

On the other hand, in order to cope with the difficulties to secure manganese ore, the Central Government of China is very likely to start out to control exports of manganese ferro-alloys from China and has already adopted from April of 2007 the system to set up floor prices for exports of manganese ferro-alloys in line with the regulations.
last modified : Tue 08 May, 2007 [11:05

 

[Rimtalay]

From the Metalsplace - subscription only
Manganese ore shortage may hit steel production
The domestic steel industry's plan to scale up production to 60 million tonnes by 2010 may take a hit as India is running low on key resources used in steel-making such as high grade manganese ore (with low phosphorus content) and ferro manganese ore.

The mining industry anticipates a huge demand-supply gap in manganese ore in the coming years. Both grades of manganese ore have separate uses in the steel industry. While the high grade manganese ore with low phosphorus content is one of the primary raw materials used in steel making, the ferro manganese ore goes into the production of ferro-alloy, which is another ingredient of steel making.

Ferro-alloys are used as alloying elements in the production of steel for modifying strength, ductility, hardness or corrosion resistance and to remove unwanted impurities such as phosphorous and sulphur. The ferro-alloy usage varies depending on the category of steel being produced.

"The reserves of high grade manganese ore with low phosphorus content are extremely low, while the ferro manganese reserves are around 27 million tonnes. The Indian steel industry will experience serious shortage of both grades of manganese ore in the next five years since manganese mining has not been promoted extensively in India," S B Chauhan, advisor to the Federation of Indian Mineral Industries (Fimi) told Business Standard.

If India has to produce 60 million tonnes of steel by 2010, the requirement of manganese ore will be 2.71 million tonnes. At present, the manganese ore production in the country is around 1.92 million tonnes (including all grades). The steel output is around 47 million tonnes annually.

The total proven manganese ore deposits (including low grade, medium grade and high grade) in India is 104 million tonnes spread over Orissa, Karnataka, Madhya Pradesh, Maharashtra, Goa and Andhra Pradesh.

The public sector undertaking Manganese Ore India (MOIL) accounts for up to 60 per cent of the overall manganese production. During 2006-07, MOIL produced 611,000 tonnes of ferro manganese ore.

"If MOIL optimises production, it will not be in a position to meet the demand for both high grade ore and ferro manganese ore in 2010. If the Indian steel companies have to meet the projected production (60 million tonnes), they have no option other than importing manganese from South Africa, which has 80 per cent of world's manganese deposits," Chauhan pointed out.

Fimi has already appraised the government of the situation. "The government should promote the recovery of manganese ore by beneficiation and sintering.Exploration efforts must be intensified to find additional reserves of high grade ore," Chauhan said.

India produces low grade manganese ore, which is in demand in China. Low grade and medium grade manganese ore has usage in dry battery as depolarizer, paints, ceramics and micro nutrients.

There are a number of private mines that extract and export low grade and medium grade manganese ore to China, Pakistan, South Korea, Bangladesh, Japan and West Asian countries. But exports are very low, around 2.5 lakh tonnes per annum.

 

[Rimtalay]

ConsMin, they are NOW doing deals at US$4.00/dmtu CIF China and at 48% Mn this means US$192/ton. Shipping price from the Port Hedland to China now stands at US$35/ton. So FOB is US$157/ton or AUD$191.50/ton FOB
Cash costs from March Quarterly report AUD$2.25/dmtu or $108/ton. PROFIT $83.50/ton.
Production 910-920,000 FY07, and expected production of 960,000 tons FY08 = PROFIT $80.1 million.
If it goes to US$5.00/dmtu the profit goes to $137.7 million.
What about chrome ore and nickel.

 

[Rimtalay]

TEX report subsciption-

Price Of Chrome Ore For China Rises Steeply To Higher Level Than US$400 / Ton CIF
= Following A Sharp Rise Of Spot Price For High Carbon Ferro-Chrome
Owing to the increasing demand for chrome ore in China, the prices of chrome ores to be sold to China are rising steeply. According to an information from China, the price of medium grade lumpy chrome ore with 42% of Cr2O3 contracted to import into China, before the May Day in China started, had risen to US$370 per ton CIF but the new price of this grade chrome ore, as offered after the May Day was over, has risen further to a level of US$400 per ton CIF China.

Also, a level of the price for high grade chrome concentrate with 48% of Cr2O3 as contracted with China has already risen to US$420 per ton CIF China, having exceeded a level of US$400 CIF. The origin of this high grade chrome ore is said as an European product but supposedly specified to be Turkish chrome ore.

The transactions with Chinese importers on chrome ores have been concluded up to shipments by the end June of 2007 but, as of April of 2007, the standard levels of prices for metallurgical grade chrome ores contracted with Chinese importers for shipments from European sources are <> lumpy ore with 42% of Cr2O3 at US$370 per ton CIF, <> lumpy ore with 38% of Cr2O3 at US$360 CIF, <> lumpy ore with 32 - 34% of Cr2O3 at US$290 CIF and <> chrome concentrate with 48% of Cr2O3 at US$420 CIF. A sharp rise of ocean freight has accelerated to soar price of chrome ore ex. European origin.

The current price of chrome ore offered from Western Australia, being near to China, is US$240 per ton CIF China for medium grade lumpy ore with 42% of Cr2O3 ( with Fe /Cr ratio of 1 : 1.5 ). This Australian chrome ore has been already contracted with Chinese importers for shipments in April - June quarter of 2007 but a small quantity of this chrome ore has been still left at the mine and the negotiation on sale of this lot is being taken place.

China has now become the largest country in the world to import chrome ore and has been still increasing the demand for chrome ore. Consequently, the supply situation of chrome ore has continued to be tight and many inquiries for chrome ore have been placed by Chinese importers before main producing countries of chrome ore in the world. The background of this aspect is that China is scheduled to produce 7.00 million tons of crude stainless steel in 2007. Therefore, it is certain to increase the consumption of chrome unit in China and spot price of high carbon ferro-chrome has risen to a higher level than US$1.00 per lb. CIF.

A trigger for this steep rise of prices for chrome ores is that the Government of India has decided to impose newly the duty of US$44 per ton on exports of Indian chrome ores, effective from the 1st March of 2007, and also risen the floor prices for exports of chrome ores from India. Furthermore, the Government has dropped a hint to control quantities of chrome ores to be exported from India.

 

[Dutchy3]

Hi Rim and all

And now we have BIG WHITE NEW AIR ... volume not need to be an issue as the spike in Oct 06 can power advances from here. Load up, STOP's in the 2.25 ish range (will not be triggered)

Bit easy this one ....

 

[kooka873]

CSM - Consolidated Minerals - Take Over

Hi folks,

I've just joined this forum - my virgin post.

I have been a holder of CSM for over 5 years.
For the first time I am a little concerned about this stock - with the take over offer of February 2007. The value is far too low in my unprofessional opinion.

It is my hope that the rest of the shareholders reject this offer.

It was mentioned in the News release to the ASX in February that by April 2007, shareholders would receive an independent valuers report on the value of this stock etc. I haven't received any further communication - has anyone else?

We are now in May & an announcement from the company I presume is close.

With the price of around $2.70 I am wondering if I should sell now, later or wait for a while to see what happens, certainly I would be unhappy at the proposed offer.

I have been pondering about Mr Baxter's management of CSM since Michael's departure from the helm of CSM. Michael did such a wonderful job.

I would welcome comments from interested CSM forum followers.

Kooka873

 

[Dutchy3]

Hi Kooka ... the pain is over, selling now is not something I'll be doing. I'm an ex beanie and also use TA to enter and exit postions. The TA on this one is as good as it's been since late 2003 in terms of my expectations of the SP increasing.

 

[Rimtalay]

Hi Kooka, don't worry they won't get it past the post at $2.28/share.
Hundreds of shareholders are fighting this one, I don't think the management realised how many shareholders would be against the takeover.
Check out the Consolidated Minerals takeover VOTE NO website
Price for manganese and chromite are up. If you want the latest commodity industry reports fill out the feedback form on the website and ask for them. They cannot be posted here, I would be sued.

 

[kooka873]

Hi Dutchy3 & Rimtalay,

I greatly appreciate your feedback & material on this stock.

I am greatly encouraged by your support & the increasing share-price.

Rumour has it that an announcement is due for June, with voting maybe occurring in/around July.

I suspect/hope your right that shareholders reject this offer, it really is an insult.

It "appears" that the Noble group still hold (or did) close to 6% of this stock.
Yes lets hope that the institutional investors look long-term & reject this offer. It wasn't that long ago that that this stock achieved the $4 mark & apart from the last divided payout or two(?) it provided great dividend payout yields in recent times. Given your information with demand for Manganese climbing & Nickel achiving great prices, your right CSM's value should continue to climb.

Interesting noting ABC TV's financial report about the very high PE ratio noted on many of China's stock market stocks, looks like that's headed for a correction in the not-to-distant future. Still it shouldn't hurt prices long term or effect Chinese demand for resources.

Cheers

Kooka873

 

[Sainter]

Howdy Kooka,
You could argue a high PER indicates high growth prospects. On that basis commodities will continue to be sucked in by China, to our benefit. Chip Goodyear strongly believes in the commodities supercycle, and given the privvy position he is in, that's good enough for me!

In my opinion, these guys overshot when they got to $4 a few years back, (due to 3 things-a high Mn price, V. profitable hedging at 55c or so, and the Portman windfall) and in hindsight I should have sold more than my 1/4 holding at the time (had bought for 60c, sold 1/4 at $3.99). As it is, I really see these things now genuinely being worth $4+ if they can get their Ni division firing and commodities hold up okay. Brokers will always put in conservative future values for commodities, but it seems in the past few years they've done nothing but revise those upwards!

Cheers!

 

[Rimtalay]

Price of chromite is still increasing. I have all the latest Commodity Industry reports, but I cannot post them here. email info@catamaransaustralia.com and ask for them and I'll email them to you.

This is the latest Corporate news -subscription only - so I'll post the whole story.

Shortage of chrome ore further hits steel makers
Already reeling under soaring nickel prices, steel firms are demanding govt block exports of chrome

India’s estimated Rs20,000 crore stainless steel industry, already reeling under the effect of soaring nickel prices in the global market, is now facing shortage of another critical input, chrome ore, with the mineral’s largest producer in the country, Tata Steel Ltd, stopping supply from 1 April.
“We have stopped selling chrome ore because we have invested in facilities for manufacturing ferrochrome,” said Sanjay Choudhry, corporate communications chief at Tata Steel.
Chrome ore is used to make ferrochrome, which goes into the manufacture of stainless steel. India has around 28 ferrochrome manufacturers who make the product for the stainless steel industry and for exports.
A Tata Steel spokesperson said the company had stopped exports of chrome ore, but did not comment on supplies to domestic ferrochrome makers.
“We are against the export of the country’s non-renewable natural resources without adding any value to them,” said Choudhry. “On this basis, we have stopped all our iron ore exports a couple of years ago and the same position exists for chrome ore.”
Tata Steel, which also manufacturers ferrochrome and globaly trades in the product, said that it would continue to sell chrome concentrate, made from low-grade ore.
The floor price of chrome concentrate is $347 (Rs14,227) a tonne, just $3 less than ore prices. Chrome ore (and concentrate) prices have grown 75% on the back of strong Chinese demand; China is the world’s largest consumer of stainless steel.
The increase in price, coupled with high power costs, will hurt ferrochrome manufacturers, analysts say. “Unless a company has captive chrome ore and coal mines to generate power, the ferrochrome business is commercially not viable,” said Manish Joshi, metal analyst at Karvy Consulting Ltd. Power typically constitutes 40-50% of the total cost of production of ferrochrome makers.
Blocking exports
On 1 March, the government levied a Rs2,000 surcharge on exports of chrome ore and chrome concentrates.
In the nine months to December 2006, until when data is available, Tata Steel exported 79,500 tonnes of chrome ore, down from 173,950 tonnes in the preceding 12 months. It shipped out 402,459 tonnes of concentrate, compared with 466,650 tonnes previously.
Tata Steel currently has three ferro alloy plants with a total capacity of 140,000 tonnes in Orissa, producing about two lakh tonnes of ferro chrome and five lakh tonnes of chrome concentrates. It has appointed two companies””Ferro Alloys Corp. Ltd and Nav Bharat Ventures Ltd””as conversion agents, to whom it will provide chrome ore to convert to ferrochrome for a fee.
With Tata’s supply out of reach, the Indian Ferro Alloys Producers’ Association, which represents the industry, is now demanding that the government stop export of chrome ore, a rare mineral with limited proven reserves within the country, 90% of which are located in Orissa.
“We must conserve the mineral in the country,” said T.S. Sundaresan, secretary general of the association.
The association has also written to mining, steel and commerce ministries to intervene on its behalf with the state-run Orissa Mining Corp. (OMC) to step up chrome ore production.
Apart from Tata Steel, OMC is the second-biggest chrome producer in the chrome-rich Sukinda valley. It sits on the largest reserve of 6,000 hectares. Tata Steel, which had a reserve of 1,200 hectares, saw its mining area reduced to 406 hectares after a 1998 Supreme Court order based on the Sharma Committee report.
The carved-up areas were parcelled off to four companies for captive consumption, Jindal Stainless Ltd, Ferro Alloys, Balasore Alloys Ltd, and Indian Metals & Ferro Alloys Ltd.
India currently accounts for 2% of the world’s proven chrome reserves, 44 times less than the world’s largest chrome ore producing nation, South Africa, but exports more than that country.
Looking to Orissa
Some stainless steel makers are now pinning their hopes on OMC, which exported 190,000 tonnes of chrome ore and 160,000 tonnes of chrome concentrates in the last financial year. But companies located outside the state fear that Orissa’s policy of making sure 70% of its chrome ore is used within the state will curb supplies to them.
“Because of chrome ore shortage, prices of ferrochrome have risen sharply,” said Dilip Singh Lodha, CEO of Jodhpur-based Stainless India Ltd, which produces 5,000 tonnes of stainless steel a month.
Kolkata-based Rohit Ferro-Tech Ltd, which has two plants in Orissa and West Bengal, complained that it is 30% short of requirement and has stock to last only three months. “Increasingly, it’s going to get tougher to access chrome unless the supply from Orissa goes up,” said Rakesh Aggarwal, president (commercial) at Rohit Ferro-Tech.
Other companies such as SAL Steel are also finding the going tough. A subsidiary of the Sal Steel Group, it had set up a 6,000 tonnes a month ferrochrome plant a year ago in Gujarat’s Kandla port, primarily to take advantage of the 16% excise and 4% tax benefit in the state.
Now, the company, which posted a turnover of Rs275 crore last year, faces uncertain supply. “We have little choice, but to import now,” said Sujal Shah, director (purchase). “The countr must ban export of chrome and supply it to domestic consumers instead,” he added.

 

[Rimtalay]

South Africa: Strong Demand Cranks Up Spot Ferrochrome Prices
http://allafrica.com/stories/200705210246.html
Business Day (Johannesburg)

21 May 2007
Posted to the web 21 May 2007

Charlotte Mathews
Johannesburg

SPOT prices for ferrochrome, of which SA is the single largest producer in the world, are running well ahead of contract prices, a promising indicator for local producers about to enter negotiations for third-quarter contracts.

SA's three major ferrochrome producers are JSE-listed Merafe Resources, which is in a joint venture with Xstrata; Samancor Chrome; and Hernic Ferrochrome. A third company, London AIM-quoted International Ferro Metals (IFM), is ramping up production at its integrated chrome mine and smelter in Mpumalanga.


Tata Group started construction of a R700m ferrochrome smelter in Richards Bay late last year, in which it will initially use Indian ore.

Ferrochrome is mainly used as an additive to stainless steel to prevent corrosion. It is also added to other steel alloys to increase hardness. London-based Numis Securities analyst John Meyer said in a note to clients last week on IFM that spot prices for high-carbon ferrochrome were 92c-98c/lb against current contract prices of 83c/lb.

At the beginning of last year ferrochrome prices dropped as low as 65c/lb as a result of market surpluses, which came in the midst of expansion programmes by all SA's leading producers. The Xstrata-Merafe Chrome joint venture has invested R1,67bn in the first phase of Project Lion, an integrated chrome mine and ferrochrome smelter near Steelpoort; Brits-based Hernic Ferrochrome expanded its capacity to 420 000 tons a year at a cost of R450m two years ago while Samancor Chrome is in the midst of a three-stage, $1,5bn expansion programme at Steelpoort. Merafe Resources financial director Stuart Elliot agreed yesterday that spot prices were higher than contract prices and new contract prices generally took their lead from spot prices. But he added that price negotiations for the third quarter would start shortly and he would prefer not to conduct those negotiations through the media.

Hernic Ferrochrome chief financial officer Hannes van Dyk said the higher spot price could be an indicator of a higher contract price in the third quarter.

Elliot said there were various reasons for the strong spot price but it essentially reflected demand outstripping supply as there were huge increases in stainless steel production in China, for uses ranging from domestic appliances to the building and automotive industries. Meyer said ferrochrome was reported to be critically short in Europe, with limited supply from Kazakhstan, SA's main competitor.


The Xstrata-Merafe joint venture has 20 furnaces, of which two have been temporarily closed. A decision would be made later this year on whether to bring them back on line, Elliot said. Van Dyk said Hernic had four furnaces, all of which were running at 100% capacity. Hernic had just completed an expansion programme and had no immediate plans to expand further, but if demand continued to be as strong as it was at present, Hernic could consider this.

Meyer noted the strengthening of the rand against the dollar, which was negative for margins for South African producers. But he said the strengthening in the ferrochrome price looked sufficient to compensate for the exchange rate.

Samancor Chrome could not be reached for comment on the price or its production capacity.

 

[kooka873]

Thanks Sainter & Rimtalay for your informative msgs.
Great to see the demand for Chromite at present levels & SP holding at present value...

Kooka

 

[Rimtalay]

Story on Ferro-chrome subscriber story

* * Charge chrome producers moot 18-20 cents rise in Q3
London*21 May 2007*15:26 Charge chrome producers are determined to close the gap between the contract price and spot price of their product in the forthcoming third-quarter contract negotiations, with some producers saying that they want the two prices to be completely on par, implying an increase of at least 18-20 cents. Charge chrome contract negotiations for the third quarter are set to start in earnest in two to three weeks ’ time, producers told MB, adding that they will seek a hefty increase in the list price for the second consecutive quarter. “ The price difference between the spot market and contracts is huge, ” said an official at a large South African producer, referring to the spot price of high- carbon ferro-chrome of $0.98-1.08 per lb, compared with the second-quarter contract settlement at 81-83 cents. The spot price started rallying from 65-68 cents at the start of the year only after the second-quarter contracts were settled, as ferro-chrome suddenly became in short supply amid booming demand from China. “ It is clear that the consumers are getting an unreasonably cheap deal in the current market, with contract prices that are far below the spot price, and then they all get percentage discounts on that price as well, ” the official said. “ This is while ferro-chrome producers are scrambling to get their hands on more ferro-chrome just to be able to supply the orders on their books, ” he added. A second producer agreed, saying that Chinese consumers "are screaming for material. The demand from China is excessive". "At the same time, we are all short of ferro-chrome," he continued. "I am having to turn down orders." The producers said the International Chromium Development Association (ICDA) meeting in Beijing last week showed consensus among charge chrome producers for a further steep price increase. “ Everybody who is important was there, including the top consumers, ” said the first producer source. “ We all talked like gentlemen and we told the consumers that they have to take into consideration that the contract price is substantially below the spot market and that on top of that the consumers get their percentage discounts. It cannot go like that. ” *
The second producer source said in the third quarter South African producers have higher electricity costs because it is the height of winter in the country. Freight costs in South Africa have increased, and the second-quarter 6-8 cents contract rise was basically wiped out after the rand strengthened against the dollar. "I will be looking for a 20 cents increase," he said. "I have no doubt there would be baulking from the large consumers, but at the end of the day the increase won't have a large impact on the ferritic [non-nickel] grade stainless steel." Even as European and US stainless steelmakers talk about production cuts while the market is in a destocking phase, the charge chrome producers argue that the stainless producers in these countries are destocking the commodity stainless nickel-bearing grade 304 stainless steel, and are indeed expanding production of the non-nickel grades. “ The ferritic [non-nickel] grades still use a lot of ferro-chrome, and if they ’ re expanding production, it means increasing demand for ferro-chrome, ” said a third producer source, adding that unlike nickel, there is no scrap substitute for ferro-chrome. Also, he said, the increase in demand from China will more than offset a decrease in the USA and Europe. “ China can take any quantity that might be available, but nobody has surplus, ” said the first producer source. He added that one non-South African producer has been talking about contract prices of $1.15-1.20, but this could not immediately be confirmed. “ We are not unreasonable, but would want the benchmark price to be equal or around the spot price, ” said the first producer source. “ I would like to see an 18 cents increase, which one could argue is a bit too much, but not if you consider that the 18 cents is not really 18 cents. The consumers get their discounts. ” A fourth producer said his peers at the ICDA were all singing from the same hymn sheet. They all agreed the third quarter would see another big increase, but his estimate for an increase was a tad more moderate at 8-10 cents. “ Everybody is looking for ferro-chrome – there is a huge shortage, ” he said, adding that large players like Xstrata and Hernic have all asked him for extra units. “ There is a huge shortage among producers, and I can ’ t see anyone in this market being aggressive, not even the new guys, not in a strong producer market like this, ” said the second producer source. However, the large western consumers will have to be convinced to dig deeper into their pockets in the third quarter, producers acknowledged. “ The consumers heard us out, but as usual they had a wait-and-see attitude, ” said the first producer. “ It will be really important for the South Africans to hold their nerve and be disciplined in the upcoming negotiations. At the moment we are all saying the same thing but it will only really count when it comes to the crunch. ”

 

[Rimtalay]

* Manganese flake closes in on $5,000 on panic buying
London*23 May 2007*14:43
Manganese flake seems unstoppable as consumers are panic-buying, causing the price to leap another $200-400 with offers now exceeding $5,000 per tonne. Flake is now selling at $4,000-4,500 per tonne, up from $3,600-4,100 previously, as consumers buy in fear of being unable to clinch the supplies they need amid booming demand and a perceived shortage of material, following the arrest of material in Rotterdam. “ The manganese flake market has been upside down for the last six months, ” said a European trader, adding that offers for prompt material in Rotterdam are in the $5,200-5,300 range, while material for shipment is now on offer at $4,750-4,800 per tonne. “ We haven ’ t seen any relief, ” he continued. “ We expected the export tax from China might increase in the announcements yesterday; it didn ’ t. I initially thought it would bring some sanity to the price of flake; it didn ’ t. Nothing has changed. People are waiting for a second round of export tax announcements with manganese included in that. ” A manganese ore producer told MB that concerns over ore availability has caused consumers to panic about getting their share of orders on any manganese products. “ Customers are worried about supplies and they are willing to settle at almost any price for their manganese products, ” said the producer source. A second trader said he hope some stability would come back to the market, but added he did not see that happening until the uncertainty about additional export tax on the metal from China is exorcised. “ Until the export tax anxiety lifts from the market, we will see continuing rising prices, ” he said. Manganese lump prices are also rising and trading at a $200 premium to flake, market participants reported. Copyright © Metal Bulletin PLC. All rights reserved.
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