South African ferrochrome makers are being squeezed by rising production costs and some are already selling at a loss, the CEO of Hernic Ferrochrome, a unit of Japan's Mitsubishi Corporation told Reuters on Tuesday.
Prices of ferrochrome - a key ingredient for stainless steel making - have fallen in the last few months due to lower demand from stainless steel producers, which have been struggling with lower demand, weakened by a gloomier economic picture.
“The sentiment is slightly pessimistic....prices are very low; you are talking about far below $1 a pound in China. The offtake volumes have actually reduced,” Hernic's CEO Emmy Leeka told Reuters on the sidelines of a Metal Bulletin ferroalloys conference.
“Our margins are being squeezed significantly. Cost saving will make you more profitable to a certain limit. You cannot do much though. We are going to an area where we are hitting the bottom but something has got to give, that's a reality.”
Rising energy and labour costs are having the largest impact on production on South African producers.
“It's been quite tough in terms of the cash cost going up,” Leeka said.
Hernic said it was unaffected by a wage dispute between a union and one of its contractors earlier this year and recently managed to negotiate a three-year agreement with organised labour. - Reuters