JOHANNESBURG (miningweekly.com) – International Ferro Metals (IFM) posted record half-year ferrochrome production of 110 092 t for the six months ended December 31, 2012, up from the 85 779 t produced in the comparative half of the previous year.

The increase in output was achieved despite the company's furnaces having experienced electrode paste problems during the second quarter of the 2013 financial year.

However, despite an increase in sales to 105 095 t, lower ferrochrome prices resulted in an after-tax net loss of R76.5-million, compared with an after-tax net profit of R38.86-million in the six months ended December 2011.

“The pricing environment for ferrochrome during the period has been challenging, with three-year-low spot prices reached in the December quarter. This led to a financial loss despite the lower cost base,” IFM CEO Chris Jordaan said in a statement on Monday.

He added that cost savings continued to be a focus area for the company.

Ferrochrome production costs for the period were R6.48/lb, compared with R6.13/lb for the 2012 financial year.

The ferrochrome producer observed a slowdown in stainless steel demand, which was hampered by excessive stocks across most regions resulting in continued downward pressure on both ferrochrome and chrome-ore prices.

The European benchmark ferrochrome price decreased from $1.35/lb in the second quarter of the 2012 calendar year to $1.10/lb in the fourth quarter of the 2012 calendar year – a decrease of 18.5% over six months – while spot prices in Asia dropped to levels below $0.85/lb.

As a result, chrome-ore prices also dropped significantly during the period and this, intensified by some supply disruptions, resulted in significant destocking of both alloy and ore, which left industry stocks at vulnerable levels at the end of the year, IFM stated.

“Spot ferrochrome prices started to recover in late 2012, owing to low stocks and production cuts by most South African producers, even though stainless steel production remained under pressure,” said Jordaan.

The benchmark price was settled at $1.12/lb for the first quarter of calendar 2013, while spot prices showed a stronger recovery and are now firmly above $0.90/lb in Asia.