Sees power crunch continuing to 2013
Hernic returns to full ferrochrome output
Suspends plans for new furnace due to power constraints
September 11, 2009
Hernic Ferrochrome, a unit of Mitsubishi Corporation, said on Friday it had returned to full capacity output from 60 percent in the spring following a rise in global demand for ferrochrome.
"In April, we were at 60 percent capacity, but since August 29 we went back to full capacity," Chief Financial Officer Willem Reyneke said at an interview with Reuters at the ferrochrome producer's plant.
Chief Executive Tetsu Kotaki, who was also at the interview, said that although the company was benefiting from the rise in demand for ferrochrome, unstable power supplies were affecting some of its plans.
"We are thinking of expanding by building another furnace, but because of huge constraints of (power) supply which may continue until 2013 we are now mothballing that project," Kotaki said.
Utility Eskom has been rationing electricity since early last year when the national grid nearly collapsed, forcing mines, smelters and manufacturing plants to shut temporarily and costing the biggest economy in Africa billions of dollars.
Eskom hiked power tariffs by 31 percent in July, as part of efforts to fund an ambitious 385 billion rand power expansion programme and is planning a further tariff increase this year.
"That is not sustainable for our operations," Kotaki said about the tariff increases, adding that Hernic's operating costs had grown by up to 7 percent since the Eskom's tariff rose in July.
South Africa is the world's biggest producer of ferrochrome, used in stainless steel to prevent corrosion.
Producers have recently been ramping up output after European contract price for ferrochrome in June jumped 29 percent to 89 cents per lb for the third quarter.
Merafe Resources said it had raised production at its chrome joint venture with Xstrata to 85 percent starting on September 1.
Merafe had been running its operations at 60 percent since July, after cutting as much as 80 percent of the output earlier this year due to the global economic downturn. - Reuters
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