LSE-listed ferrochrome producer International Ferro Metals (IFM) CE David Kovarsky said he was confident that low-cost ferrochrome producers, such at IFM, would be “rewarded” when demand for the commodity picked up again.

With the release of its operational performance for the six months ended December 31, 2008, Kovarsky noted that IFM was disappointed in the collapse of ferrochrome demand, which has prompted it to cut production, shut its furnaces and delay its capital expenditure projects.

“The board is pleased with the management’s swift response both to the situation and the inherent operational challenges. The production figures for the first half of the year illustrate the high quality of IFM’s ferrochrome operations,” he said in a statement to shareholders.

Production was down by 47% in the second quarter to 31 289 t, compared with the 59 470 t produced in the first quarter of the year.

IFM reported that global ferrochrome production cuts amounted to about 70%, while production from South Africa had been reduced by about 85%. South Africa is the world’s largest ferrochrome producer.

Meanwhile, the company, as well as ferrochrome industry commentators, had already started seeing a “revival” of demand from China.

The producer said it has started receiving more enquiries for material from Chinese stainless steel producers, with smaller numbers of enquiries coming from Europe and the US.

However, there was an abundance of chrome-ore inventory and enough ferrochrome available on the market, particularly from Indian and Chinese producers, which would continue to dampen prices and demand from non-Chinese sources, it said.

In order to ensure its sustainability through the current economic times, the company has implemented cost control measures, such as terminating contractor staff and reducing its monthly expenditure by R35-million.

It had also stopped purchasing coke, which had been its second-biggest input cost, but would keep in contact with its suppliers to ensure that availability of supply in future.

IFM was budgeting R100-million total capital spend for the remainder of the financial year. This would include spend on furnace maintenance, which would be concluded in March.

The company’s half-year results would be released on February 23.