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Johannesburg - South Africa's only zirconia producer, Foskor Zirconia, has temporarily shut down its plant after demand for its product from the steel industry dropped by more than half since November 2008.
The drop in demand has resulted in stockpiles of excess inventories at Foskor Zirconia, making it economically unviable for the plant to continue producing zirconia.
"We can drop our prices as low as we want, we won't sell our inventory. Everyone is in the same boat," Zirconia CEO Charles Schmidt told Miningmx.
Schmidt estimates there are six zirconia producers in the world and all of them have suspended production to await better market conditions.
Forskor Zirconia is the world's third largest producer of the mineral, with 4 200 tons per annum of installed capacity. It had sales in 2007/08 of $16m. It is a mine-to-market supplier of zirconia.
The global steel market has experienced a decline. Steel companies have cut back on expansion plans and new plant projects, reducing demand for zirconia, Schmidt said.
A union official in Europe said after a meeting with the management of ArcelorMittal, the world's largest steelmaker, the company planned to shut four more furnaces, taking the number of operating furnaces in Europe down to 11 from a total of 25, Reuters reported.
ArcelorMittal said the cuts were temporary and that production would be restarted as swiftly as possible when market conditions improved.
Foskor Zirconia has reached an agreement with unions to suspend operations until the markets recover.
Strategic decision
"Given the scarcity of skills in this country, we will do everything in our powers to protect and preserve jobs in these difficult times. We do not envisage any retrenchments in the foreseeable future," Schmidt said.
"The decision to close the plant temporarily is strategic. We expect the market and global demand to pick up within the next quarter at which point operating activities will resume as normal," Zirconia said in a statement on Wednesday.
Zirconia is a product used predominantly as a refractory material in steel production. It has a melting point of 3,000 degrees Celsius, which makes it the ideal material to manufacture equipment capable of withstanding the heat of steel smelting.
In April 2008, the unlisted Foskor Group transferred its non-core zirconia assets to a separate legal entity known as Foskor Zirconia.
In August 2008, a 51% stake was sold to India's Carborundum Universal Limited. Foskor Zirconia is currently the largest supplier of fused zirconia in the southern hemisphere and exports mainly overseas.
- Miningmx.com
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