International Ferro Metals (LSE: IFL), the South African integrated ferrochrome producer, said that its margins were being squeezed by the weak US dollar and increasing freight and reductant cost.
IFL has also run into some operational hiccups including the need to replace the gear box in a new ball mill and the replacement of electronic pressure rings. The net consequence of the repairs meant the company would produce 30,000 tonnes less than anticipated for the year to 31 January 2008. Despite the setback, IFL said it anticipated the plant would operate at an annualised rate of 267,400 tonnes within a few months.
But the major concern for IFL was the 6% decrease in the US dollar against the South African Rand and increased costs associated to freight and reductant. Ferrochrome prices are set once a year, and IFL said the industry was anticipating a price increase from the 1st January. Ferrochrome currently sells at US$1/lb.
Shares in IFL fell 6.5%.