FerroChrome Furnaces Ltd. said it seeks to be the biggest maker of a specialist form of the alloy for the auto and aviation industries as soon three years after the closely held South African company starts output.
FerroChrome Furnaces will start production of low- and medium-carbon ferrochrome at Rustenburg, northwest of Johannesburg, in January and targets output of 300,000 metric tons a year by the end of 2014, it said today. It seeks production capacity of 420,000 tons within two years.
“We aim to corner the low- and medium carbon ferrochrome supply markets during the next two to three years, and if that means a price war to achieve market share, we are ready to do battle and we have the resources to do so,” 50-percent shareholder Alibek Issaev said in a statement distributed in Johannesburg.
South Africa was the largest producer of chrome ore and ferrochrome in 2011, according to the U.S. Geological Survey. The alloy is produced mostly in a higher carbon format and used largely as a feedstock for stainless steel. Producers in the country, like Glencore Xstrata Plc (GLEN) and International Ferro Metals Ltd. (IFL), agreed to output cutbacks in the last two years due to power shortages.
Current demand for low- and medium-carbon ferrochrome outside China is close to 600,000 tons a year, Udo Heck, managing director of Cologne-based Metal Partners GmbH, told reporters in Johannesburg today.
Eurasian Natural Resources Corp. (ENRC) made 138,000 tons of low-and medium-carbon ferrochrome in 2012, compared with 1.2 million tons of the high-carbon grade, according to the London-based, Kazakhstan-focused company’s annual production report. Glencore said Sept. 10 it is the largest ferrochrome producer, with 14 percent of the global market.
Issaev, a Dubai-based Russian businessman who is the founder and owner of the dudu.com social network, bought his stake in FerroChrome Furnaces from entrepreneur Abbas Moti, the company said in an e-mailed statement earlier this week, without giving any terms. Arsen Khusnutdinov, an adviser to Issaev, said Sept. 16 the deal ran to “several hundreds of millions of dollars.”
The Moti family is the majority shareholder in Johannesburg-traded Andulela Investment Holdings Ltd. (AND) The family own a stake in a platinum processing plant at Anglo American Platinum Ltd. (AMS)’s Amandelbult mine, according to the statement.
FerroChrome Furnaces will source chromite and other feedstock from South African and Zimbabwean suppliers, said Gert Kriel, a mineral project analyst at advisory firm Venmyn Deloitte.
FerroChrome Furnaces has arranged initial electricity supply from the local municipality, said company spokesman Ashruf Kaka. It is in talks with state-owned utility Eskom Holdings SOC Ltd. for further supplies and will also develop its own power options, Kaka said.
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