Ferrochrome producers ride the boom

The rising demand and price of ferrochrome in the international market has proved to be a windfall for the domestic manufacturers of the commodity.

The booming market scenario has not only brought some of the closed ferroalloys units back into operation but also encouraged the running ones to step up output to book profits.

The Orissa-based IMFA group, the largest domestic producer of ferroalloys with 130 MVA installed furnace capacity, has posted highest ever output of 102,539 tonnes of ferrochrome in 2003-04.

In this, the share of Indian Charge Chrome Ltd (ICCL), a sister concern of IMFA, is 74,240 tonnes, which is 118 per cent of the installed capacity of the plant.

Similarly, the 50,000 tpa plant of FACOR at Bhadrak, which was closed till about a year back, has since restarted operation and producing 4000 to 4,500 tonnes of ferrochrome per month. So also the Ispat Alloys at Balasore, Bamanipal plant of Tisco and Nav Bharat unit at Dhenkanal are all operating almost at full capacity.

The boom in ferrochrome market can be attributed to two factors, says Subhrakant Panda, joint managing director of IMFA group.

First, ferroalloys being used in steel making, the rising fortune of steel industry has pushed up the demand for ferrochrome and hence the prices. To emphasise the point he said, China which was earlier exporting ferrochrome has become a net importer of the commodity.

Second factor is the appreciation of South African currency Rand against dollar. South Africa controlling a major chunk of world ferrochrome trade, the manufacturers of the commodity in that country have pushed up the prices to maintain profitability in the face of Rand appreciation.

The international ferrochrome prices are currently ruling at 65 cents per pound of chrome, a new high, as against only 26 cents in 2001. In the last four months alone the price has appreciated by 19 cents.

However, Panda does not entirely agree to the current situation being a "windfall" for the industry. The rise in price should be seen from a base of 35 to 36 cents per pound of chrome, which was the production cost when the international price was ruling at 26 cents, he said. Besides, sharp rise in the input cost, particularly the coke, has brought pressure on the margins.

The price of coke, which constitutes 60 per cent of ferrochrome, has gone up from $ 65 to 70 per tonne to $ 450 per tonne at present. This is mainly due to choking of coke supply by China, from where most of the domestic manufacturers import their coke requirement.