Turkey's Yildirim Plans to Produce 400,000 Tons of Ferrochrome Annually Starting in 4Q09

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Researched by Industrial Info Resources (Sugar Land, Texas)--Yildirim Holding A.S. (Istanbul,Turkey) plans to produce 400,000 tons per year of ferrochrome starting in the fourth quarter of 2009. By the end of 2008, the company expects to have eight ferrochrome-producing furnaces in operation. They will begin to produce at full capacity beginning in the fourth quarter of 2009 from Sweden and Turkey. Although ferrochrome demand has slowed, a comeback is expected in the early third quarter of next year, as Yildirim CEO Robert Yildirim said he predicts liquidity to return to the market and higher growth.

Yildirim Holding, through its subsidiary Eti Krom A.S. (Istanbul, Turkey), the biggest metallurgical- and refractory-type chrome ore supplier and Turkey's sole high-carbon ferrochrome producer, acquired ferroalloys producer Vargon Alloys AB (Vargon, Sweden), the largest European ferrochrome producer, in February. Eti Krom has an installed annual capacity of 150,000 tonnes of high-carbon ferrochrome; agglomerations like pelletizing, sintering and briquetting; and four furnaces divided into two units. One is an operational open electric arc furnace (Unit A: 2 x 17 megavolt-amperes (MVA)), and the other is a closed electric arc furnace that is scheduled to be commissioned in August 2009 (Unit B: 2 x 30 MVA). The company's Turkish plant sites are in Elazig (300,000 square meters) and in Iskenderun (42,760 square meters, capacity of 200,000 million tonnes). Chrome ore and ferrochrome stocking capacities are 500,000 and 100,000 million tonnes, respectively.

Eti Krom plans to have greater participation in the ferrochrome market, and the purchase of Vargon Alloys will increase its capacity to 220,000 tonnes after all of the furnaces go into operation. Eti Krom is expected to export 570,000 tonnes of chrome to China by the end of the year, representing half of Turkey's chrome exports to China, as well as export approximately 300,000 tonnes of chrome to Sweden. Eti Krom could buy Chinese ferrochromium assets in 2010, if the stainless steel market recovers.

Bulk alloy prices will be hit harder by the credit crisis compared with those for noble alloys, such as molybdenum, vanadium, tungsten, titanium and their alloys, and a recovery in both markets is unlikely in the next six months. Consumers and traders have been destocking after over-buying in the first half of 2008, aggravating the market and the price of high-carbon ferrochrome, which fell to $1.85-$2.15 per pound. The Chinese stainless steel and crude steel market weakness is the biggest worry for 2009.

Ferrochrome prices should halve in the first and second quarters of 2009 as lower ferrochrome prices combine with lower sales tonnages. According to the CRU Metals Mining Fertilizers Steel Copper Price Risk Management authority, after a 12.4% growth in 2007, the world's high-carbon ferrochrome consumption should increase by 4.4% in 2008, by 11.7% in 2009, by 9.5% in 2010, by 3.4% in 2011, and by 7.5% in 2012. The high-carbon ferrochrome market should move into a deficit in 2009 and 2010, as power-related constraints on South African production continue. China would import about 13.5 million tons of chrome ore by 2012, of which 6 million tons would come from South Africa, largest chrome ore source producing 8.8 million tons in 2007, to increase to 10.4 million tons in 2008 and 13.7 million tons by 2012. The stainless steel and ferrochrome industries' global demand should reach 36.59 million tons by 2012.

The Yildirim group of companies is a fast-growing international trade house engaged in coal, coke and steel trading, fertilizer and chrome ore mining, ferro-chrome production and trading, logistics, shipping and port operations. The group's growth rate is about 50% based on an estimated $1 billion turnover in 2006.

Eti Krom owns leasing and operating licenses of 14 chrome ore mines and one quartzite mine. Eleven chrome ore mines are located in the Elazig region with proven reserves of 10 million tons but expected reserves to be at a minimum of 15 million tons. The other three chrome ore mines are in the Adana and Hatay regions with known reserves of about 30 million tons of chrome ore, mostly concentrate. Eti Krom will set up a 200,000-ton-per-year concentrating plant in the Adana-Aladag region. The company also has a slag-recycling operation in Elazig. Eti Krom is also one of the world's leading producers of lumpy chrome ore.

Vargon Alloys is one of Europe's largest producers of ferrochrome, an alloy that gives steel its hardness and corrosion resistance. Ferrosilicon, another alloy, is used in all steel production. Ferroalloys are essential raw materials for the steel industry. Two-thirds of the company's output is exported, and the remainder goes to the Swedish market. Vargon Alloys handles more than 1 million tons of materials annually. In 2008, the Yildirim group of companies acquired Vargon Alloys. The company has four furnaces units currently producing ferrosilicon, charge-chrome and high-carbon ferrochrome. It recently bought two new furnaces that are due to be delivered shortly to its operations in Turkey.

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