Subhrakant Panda, MD, Indian Metals and Ferro Alloys expects ferrochrome prices to cool off in the near term.
Speaking to CNBC-TV18 he said that the fundamentals driving ferrochrome prices remain unchanged.
Below is the verbatim transcript of Subhrakant Panda’s interview to Mangalam Maloo & Reema Tendulkar on CNBC-TV18.
Reema: With the ferrochrome prices being set higher than expected so that is the first question a) is it higher than what you were anticipating and if yes by how much, how would it compare with the prior quarters and what percentage of your selling price of ferrochrome is linked to the European benchmark?
A: You are absolutely right that the ferrochrome benchmark price for the April to June quarter has been set at a 154 cents per pound of ferrochrome content that is roughly at about 6.7 percent lower than in the current ongoing quarter which was at a 165 cents. You actually need to see it in the context that barely a couple of quarters ago we were hovering around the USD 1 mark and it was actually in the January to March quarter that prices moved up sharply keeping in line with a surge in spot prices in China.
What we have been saying is that we expect a slight cooling off and that is actually better in the long term because when you have had such a sharp up move from about a USD 10 to a USD 65, for it to cool off a little bit is actually not bad. It brings us in to sustainable territory and you have to see it in the context of where realisation stood through all of 2016 and we are still substantially higher. I would just like to add here that the fundamentals which are driving ferrochrome remain unchanged which is strong demand coming out of China and other countries as well as high chrome ore prices which is of course an input cost.
Mangalam: At this level what exactly could the EBITDA per tonne be for IMFA and at the same time what kind of volumes do you expect in quarter four?
A: As far as quarter four volume is concerned, we are looking at about roughly of about 55,000 to 57,000 tonne that for FY17 will take us slightly above the guidance that we had given which is roughly about 2,30,000 tonne. In terms of volumes for FY18 we are actually projecting about 2,50,000 tonne because of higher environment clearance for one of our unit which has come through little while ago. So, you will actually see a volume boost for FY18.
Mangalam: What exactly is the EBITDA per tonne you can do at USD 1.54 per pound at the amount that was set by yesterday?
A: One clarification the actual transaction prices are actually lower than what the bench mark prices are, so you will see transaction prices being lower than that, but EBITDA margins should be fairly healthy at about 30-35 percent.
Mangalam: The EBITDA per tonne if you can tell us the absolute number?A: It is safe to work with a figure of roughly about Rs 35,000 a tonne.