Fin24

Merafe output down on power deal

2012-05-02 09:41

Johannesburg - South African ferrochrome producer Merafe Resources [JSE:MRF] said on Wednesday output from its joint venture with London-listed Xstrata fell 21% in the first quarter, after some furnaces were suspended to cut down on power demand.

Merafe said in March that it had struck a deal with state-owned utility Eskom to shut seven of its furnaces until the end of May and allow Eskom to buy back the energy the plants would otherwise have consumed.

A total of 130 000 tonnes could be lost in the first and second quarters as a result of the shutdowns.

South Africa has been struggling to meet demand for power as new plants meant to plug the shortfall have been delayed. Supply will remain vulnerable until the first units of Eskom’s new stations become operational late next year.

The national grid nearly collapsed four years ago, forcing mines and smelters to shut for days and costing Africa’s top economy billions of dollars in lost output.

Merafe said producers had achieved a 17% rise in the European benchmark ferrochrome price to $1.35 per pound for the second quarter, compared with the previous three months.

“Margins, however, remain under pressure as a result of continued higher mining inflation, increased standing charges and a relatively strong rand compared to the US dollar,” the company said in a statement.