Zaporizhzhya Ferroalloy Shuts Down More FeSi Facilities.

Ukraine’s second largest ferroalloy producer Zaporizhzhya Ferroalloy (ZFER: BUY) halted it’s a third electric arc furnace for producing FeSi. The company’s officials announced that increases of electricity tariffs by 5% has made the production of electricity intensive FeSi unprofitable since March 1. Concorde Capital: The company has already reduced production of FeSi by 47% in 2005. Company officials have been wrangling with government for lower electricity tariffs. We estimate that ZFER’s share of FeSi in total exports will decrease and most of company’s FeSi output will be sold domestically due competition from Russian producers who enjoy lower electricity tariffs. We estimate that this year the company will concentrate on less electricity intensive SiMn which is also a core material for the production of low carbon FeMn (used for the production of high quality steel and a raw material for metallic manganese). Last year ZFER partly switched to production of manganese-based ferroalloys from making FeSi due to higher demand for the former and will continue to do so this year. In addition, after a gas for coke substitution by steel producers (which will increase sulphur content in pig iron) we expect growth in demand for manganese alloys used for the removal sulphur.