(Repeats story from late on Tuesday, no changes)
* Stainless steel ingredient's prices up 70 pct since
* Glencore and Samancor looking at Hernic Ferrochrome
* Duo already dominant in top producer South Africa
* China's production capability could stabilise market
By Pratima Desai
LONDON, Nov 29 Rocketing ferrochrome prices are
expected to accelerate consolidation among producers in South
Africa, increasing the global stainless steel industry's
reliance on mining group Glencore and chrome ore
Nearly 60 percent of the world's production of global chrome
ore -- used to make stainless steel raw material ferrochrome --
comes from South Africa, where Glencore and Samancor are casting
an acquisitive eye over smaller rival Hernic Ferrochrome.
Four Sources in the stainless steel and ferrochrome
industries told Reuters that Glencore is looking to reinforce
its dominant position with the purchase of Hernic, which is
majority owned by Japan's Mitsubishi Corp.
Swiss-based Glencore expects to produce 1.57 million tonnes
of ferrochrome this year but has capacity for nearly two million
tonnes. Hernic would give it a further 420,000 tonnes.
"Hernic would be a good fit for Glencore ... and (Glencore)
won't want to see new players in South Africa's chrome
industry," said Mark Beveridge, of commodities consultancy CRU.
"Glencore has invested a lot of money in South Africa and is
a driving force behind consolidation. It's not good news for
stainless steel producers."
Glencore declined to comment.
The industry sources said that Mitsubishu is considering a
sale, given that current ferrochrome prices are likely to push
up Hernic's value. The sources gave no valuation estimates for
the company, which describes itself as the world's
fourth-largest integrated ferrochrome producer.
Macquarie analysts estimate global ferrochrome output at
10.7 million tonnes this year against demand above 11 million
tonnes, which has helped to lift prices by more than 70 percent
since September to about $1.10 per lb.
A Mitsubishi Corp spokesman in Tokyo, when asked whether the
Japanese trading house is looking to sell its 50.1 percent
stake, would only say that "Mitsubishi Corp is considering all
possible ways to support sustainable operations of Hernic
Two of the sources said that South Africa's Samancor is also
interested but that Glencore is in a stronger position to fund
acquisitions than at the start of 2016, with group revenues
rising on the back of the recent rally in commodities prices.
A Samancor representative was not immediately available for
Samancor is Glencore's biggest rival in ferrochrome, with
CRU's Beveridge putting its capacity at 1.4 million tonnes a
year, rising to 2 million tonnes including joint ventures.
"Glencore isn't going to let someone else move on Hernic,"
one chrome industry source said, though he added that the
company may want to wait to see where prices settle and that
China's role in the market will be important.
Ferrochrome importer China also has the ability to produce
its own supplies, having built large amounts of capacity over
the past 10 year, with the potential to stabilise prices.
China's chrome ore stocks are running low, but restocking
may not be difficult, sources say, because smaller producers in
South Africa, India and Turkey have restarted or likely to
restart mothballed capacity.
"If the Chinese can get the ore, they can make money by
producing ferrochrome," CRU's Beveridge said.
Recent data from the International Stainless Steel Forum
showed Chinese output at 11.73 million tonnes between January
and June, up 7.9 percent from the first six months of last year.
(Additional reporting by Yuka Obayashi; Editing by David