On October 25, International Ferro Metals (LSE: IFL), South African producer of ferrochrome (an essential ingredient in stainless steel production), released its production results for the three months up to September 30, 2011.
The company produced 31,637 mt of ferrochrome during the period in question, down 41.2 percent compared to the corresponding of 2010 and down 25.7 percent compared to the previous quarter, due to scheduled shutdowns for roof upgrades. Ferrochrome sales volumes were up 20.7 percent from the previous quarter and up 45 percent from the corresponding period of last year, amounting to 41,929 mt for the three months in question.
International Ferro Metals's ferrochrome inventory was 14,983 mt on September 30, down from the 25,276 mt recorded at the end of the previous quarter and 42,870 mt at the same time last year. Net cash balance was ZAR 367 million ($46.47 million) on September 30 this year, up from a net cash balance of ZAR 248 million ($31.4 million) on June 30, 2011.
According to International Ferro Metals' statement, demand for stainless steel remained relatively flat during Q3 2011 in contrast with the traditional seasonal third quarter recovery. Declining nickel prices were a major contributor to lower stainless steel demand. Stainless steel supply and demand was well balanced in the USA and Asia; however, European mills resumed ramping up production. Fears of a double dip recession negatively affected demand as consumers kept stock levels low, which in turn negatively affected demand for ferrochrome.
Commenting on the update, chief executive Chris Jordaan said, "The successful ramp-up of IFL's two furnaces on time and on budget is a genuine operational achievement and a key part of our cost-cutting program. The company should be cash generative from October 2011 and we expect this position to continue to improve as the furnaces are optimized and when the UG2 plant is commissioned in January."