Integrated ferro-chrome miner Indian Metals and Ferro Alloys Ltd (IMFA) expects margins to improve from Q3 (quarter-ending December) onwards on the back of improvement in ferro-chrome prices and lower expenses, especially coal and coke prices.

EBITDA margin in Q2 was at 12 per cent in view of higher input costs.

According to Prem Khandelwal, CFO, IMFA, ferro-chrome prices have started moving upwards post September to $0.94 per pound of chrome content (for 60 per cent chromium).

Chrome prices had dipped to $ 0.86 per pound of chrome in Q2, in view of the weak commodity cycle.

Ferro-chrome is an alloy of iron and chromium. The high carbon ferro-chrome is an intermediate product and is used as a feed material in the production of value-added materials such as stainless steel.

“Indications are that there will be further firming up of chrome prices this quarter. In view of the depressed commodity cycle, and high cost of operations, some non-integrated players have shut. So there is a short supply in the market which leads to an increase in cost,” he explained.

Week-on-week, chrome prices in India have firmed up by ₹2,500 per tonne.

According to a Steelmint report, smelters received multiple enquiries from domestic and export markets which led producers to raise their prices depending on stock availability. Domestic chrome ore prices have edged up, while imported chrome prices rose due to high shipping costs and an unstable geopolitical situation in the international chrome ore market.

Low spot inventory at ports in China kept prices supported.

China’s ferro chrome (HC60 per cent) prices inched up by $14 per tonne as some buyers restocked. . Furthermore, the severe epidemic in some parts of the country resulted in a decrease in output of ferro chrome resulting in a positive trend overall, with Indian smelters following suit.

Lower cost

According to Khandelwal, apart from better realisations, IMFA will also benefit from lower coke and coal price (e-auction prices) in Q3. From $700/tonne, coke prices have climbed down to $450–500/tonne; while spot coal prices in e-auctions are down to ₹7,000/tonne (down from the peak of ₹11,000-12,000 / tonne.

“So the cost of lower input costs should come into play in Q3 because of which numbers and margins will improve,” he said.

In the September quarter, IMFA reported a net profit of ₹18 crore, down 88 per cent YoY, while revenues stood at ₹673 crore. The company has captive chrome mines in Sukinda and Mahagiri and is targeting volume sales of 61,000-odd tonne (of chrome ore) in Q3.

The December quarter is expected to see lower production versus Q2, because of maintenance shutdown at its plants.

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