Reuters quoted Merafe Resources as saying that global ferrochrome demand is expected to raise by 11% to 9.87 million tonnes this year outstripping expected supply of 9.29 million tonnes.

Citing research by Heinz Pariser, South Africa's largest ferrochrome producer said production is expected to rise by 7% as producers cut their output due to higher costs. Costs of production have increased across all regions and this together with lower spot prices has encouraged producers to curb output of ferrochrome in the next few months.

Merafe, which operates a joint venture with Xstrata has said that it will reduce output during South Africa's June to August winter period to conduct maintenance and to mitigate the impact of higher than average electricity tariffs.

South Africa is home to 77% of the world's chrome ore reserves but the cost of mining in Africa's biggest economy is rising on the back of sharp hikes in electricity prices. In 2010, South Africa produced 41% of the world's ferrochrome supply and around 41% of that came from the Merafe and Xstrata JV.

Merafe said last week it would invest ZAR 1 billion in an expansion project proposed by Xstrata which is meant to boost production and reduce costs. The project will include the building of a new, more energy efficient smelter with a capacity of 360,000 tonnes per year, increasing the venture's overall ferrochrome capacity to over 2.3 million tonnes.

(Sourced from Reuters)