Ferro-chrome producer International Ferro Metals yesterday reported an 85% jump in output for the quarter to December compared with the year-earlier period, after it restored production at its second furnace in August on an improved outlook for demand and prices.

Sales volumes were up 61% for the three months, reflecting the suspension of production that took place in November 2008 during the global commodities market crash. Production for the quarter rose to 57942 tons from 31289 tons in the comparable period of the previous year.

The company – which operates two ferrochrome smelters near Brits – said its ferrochrome inventory stood at 32504 tons at end-December, from 9752 tons at end-September, after management decided to increase stock levels to take advantage of expected price increases.

The signs of recovery in the global ferrochrome industry follow a dismal final quarter of 2008 and first half of last year, when companies were forced to mothball operations.

A slowdown in stainless steel production late in 2008 and earlier last year led prices to fall sharply, and local producers suspended 80% of their production capacity for most of last year.

Ferrochrome is an essential ingredient in stainless steel, and SA is its biggest producer. Several other major producers in SA, including Samancor Chrome, Hernic and Xstrata-Merafe Chrome Venture, have brought most of their furnaces back to full production since the start of September as demand started to pick up, driven by China.

Ferro Metals said benchmark prices increased to 1,03/lb in the fourth quarter of last year, from 0,89 in the previous quarter.

CEO David Kovarsky said growing demand for steel, particularly from China, was behind the latest increase in production and sales. So far this year, stainless steel production and demand had both continued to strengthen and he forecast a better year for the ferrochrome market.

"This has had a positive impact on ferrochrome demand and spot prices," Kovarsky said.

"This trend is similar to those experienced by other commodities and has been driven by Chinese growth and a stabilisation of other economies. We expect this trend to continue.

"Following the successful start up of our second furnace in August, the company has built up inventory levels in anticipation of higher prices this year.

"Management and the board are confident that the company is well placed to take advantage of a revival in the global stainless steel and ferrochrome markets due to its strong balance sheet, furnaces are running at high utilisation levels, and strong relationships exist with the Chinese market."

The company had a net cash balance of R248m at the end of last month, which would be used to fund its capital expenditure for the remainder of the financial year, Kovarsky said.