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Afarak to scale back production at Mogale operations amid challenging headwinds

“As we have previously indicated, it has proven challenging to mitigate the headwinds that our operations at Mogale have faced for some time,” said chief executive Guy Konsbruck.
Afarak
The group will halt the use of two submerged arc furnaces at Mogale

Afarak Group PLC (LON:AFRK) plans to scale back production at its Mogale operations in South Africa amid weak ferrochrome markets.

Ferrochrome prices have been falling, in part due to concerns surrounding an ongoing trade dispute between the US and China.

Rising energy costs in South Africa has also posed a problem for Afarak in achieving a good performance at its Mogale smelter.

READ: Afarak first quarter impacted by weaker chrome market

Afarak blamed a tough ferrochrome market for a wider first-quarter loss in a May trading update.

In an update on Wednesday, the company said the challenges in its South African operations have persisted since its first quarter results.

In response, the group has decided to halt the use of two submerged arc furnaces at its Mogale smelter.

The Mogale smelter will only operate its 40 MVA plasma furnace for plasma charge chrome to produce about 4,000 metric tonnes per month, as well as the convertor for medium carbon ferrochrome for production of 1,400 metric tonnes per month.

“As we have previously indicated, it has proven challenging to mitigate the headwinds that our operations at Mogale have faced for some time,” said chief executive Guy Konsbruck.

“Falling world market prices for our products, largely caused by the uncertainties around the US-China trade war and the sky-rocketing energy costs in South Africa have forced us to review our strategy and reduce our output. 

“We have fought very hard to avoid this step, but given the losses recently generated at Mogale, and the absence of any signs of state support for the industry, we had no other choice.”

Konsbruck said the company has started talks with the workers union to fund a solution to safeguard the asset and save as many jobs as possible.

All existing sales contracts will be honoured, he said.

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