Chuo Denki Kogyo to Expand FeMn Production Cut

Tokyo based ferromanganese maker, Chuo Denki Kogyo expands the production cut to 20-25% of capacity in and after April. The firm expects the sales volume would decrease in and after April while the firm reduces the production by around 10% now due to slower demand. The firm expects the production cut could be 20-25% through fiscal 2009 starting April under the uncertainty for the demand. The firm tries to minimize the production cost by shifting night time operation with cheaper electricity when the profitability gets worse due to production cut along with high priced raw materials and lower selling price.

The firm reduces the production step by step at Kashima plant, which has capacity to make 90,000 tonnes per year of high carbon ferromanganese and 30,000 tonnes of silicomanganese, since January to meet slower demand. The production cut is estimated to be around 10% of the capacity in January-Mach. While the production cut is relative small, the president Ryo Someya said the firm has to reduce the production and is planning to cut the output by 20-25% in April-June when Sumitomo Metal Industries and Japanese steel industry expand the steel production cut.

The production is likely to reach almost full capacity of 120,000 tonnes in fiscal 2008 due to high level production in the first half year. The firm expects certain recovery of the demand from mid-2009 but the demand couldn’t reach the high level in first half of 2008. The firm eyes temporally suspension of the operation and seeking employment adjustment subsidy when the demand could keep low level through the year.

The high priced raw materials cost would keep impacting on the profitability for around 6 months more due to the existing stock and slower consumption under the production cut despite potential major price down for fiscal 2009. The firm tries to improve the cost structure when the profitability gets worse due to the unfavorable condition including lower selling price in and after April.