January 14, 2009 / 7:56 AM / in 11 years

Japan NSSC may skip Q1 S.Africa ferrochrome shipments

TOKYO (Reuters) - Japan’s Nippon Steel & Sumikin Stainless Steel Corp (NSSC) may skip lifting January-March shipments of ferrochrome from South Africa due to weak demand, a company official said on Wednesday.

It would be the first time for the company to defer ferrochrome shipments, he said, underscoring how demand for ferrochrome has slumped due to the sharp economic downturn.

South Africa is the world’s biggest producer of ferrochrome, a key component in stainless steel to deter corrosion.

NSSC is owned 80 percent by Nippon Steel Corp and 20 percent by Sumitomo Metal Industries Ltd, and is Japan’s biggest comprehensive stainless steel maker, according to the company’s website.

The NSSC official said details of the agreement had yet to be worked out, but the company was already suffering from a glut in ferrochrome supplies.

“Given (high) inventory and (weak) demand ... it is just not possible to buy fresh supplies,” he said.

He said NSSC was still in discussions with leading South African ferrochrome suppliers on how much it would buy under 2009 contracts.

NSSC typically holds term talks with Xstrata Plc and Samancor Chrome, though the official declined to name companies in its recent negotiations because the talks are still taking place.

Wednesday’s news was in line with what South Africa’s ASA Metals Marketing Manager Ernest Ives told Reuters in a telephone interview on Monday, which was that some of its clients were deferring shipments of ferrochrome due to weak demand for stainless steel.

“Our traditional customers are still taking a bit of the normal volumes but some of them have now asked the first quarter be skipped totally. I think all in all everybody’s going to lose one quarter’s business, end of story,” Ives said.

No term price has been set for first-quarter ferrochrome supplies to Japan, which are typically decided at the end of the previous month or early in the first month of the quarter.

The term price for ferrochrome to Japan for October-December fell 20 cents or 9 percent to $1.93 a pound, marking the first cut since 2006, amid signs the global economy was headed for a steep downturn.

In contrast, the term price for the previous quarter, in July-September, had been set at a record high of $2.13 due to supply tightness.

Japan’s economic woes have worsened since the last term price was set in early October, with the country slipping into a recession for the first time in seven years as exports, the engine of its economic growth, plunged.

What may be a prolonged contraction has hit the world’s biggest economies including Japan and the United States, dealing a blow to a wide spectrum of the commodities industry.

In the stainless steel industry, Thainox Stainless PCL, Southeast Asia’s largest stainless steel maker, last month said it planned to stop production for one month due to weak global demand.

The move to reduce output is worldwide and large firms are no exception.

In November, ThyssenKrupp, one of the world’s leading producers of stainless steel, said it would extend the Christmas holiday break at its largest stainless cold-rolled unit, Germany’s Nirosta, a spokesman said.

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