As discussed in previous editions, power buyback agreements have been agreed in South Africa. This will reduce South African production of ferro-chrome and, with demand improving, as mills are beginning to replenish inventories for next year, the changing fundamentals are pushing prices higher. The absence of demand through much of 2012 led to Xstrata-Merafe announcing the temporary closure of 5 of its 20 furnaces for the first calendar quarter of 2013. This will remove 100,000 tonnes of material from the global supply chain and suppliers argue that actually 300,000 tonnes will be removed in South Africa overall. On December 19, the Q1 2013 ferro-chrome benchmark was agreed between South African producers and European stainless mills. The rise of $0,025 to $1.125/lb will disappoint suppliers that were pushing for as much as a $0.10/lb increase, but it is a turning point that seemed far from guaranteed with spot prices still far lower. As the outlook for the stainless steel market should improve, spot prices could lead to the Q2 benchmark being negotiated highertoo. The Japanese Q1 2013 benchmark moved higher by the same amount.
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