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US consumers look to delay ferroalloys deliveries

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US consumers of bulk <link _top>ferroalloys are said to be looking to delay deliveries of contracted material, hoping to push back the shipment of some materials into the first quarter of 2009, amid a slump in demand and economic uncertainty.

At the same time, few consumers are showing any enthusiasm to book long-term contracts on any alloy for the first quarter of next year or beyond and spot market activity is virtually at a standstill, market participants told.

One consumer admitted he was seeking to push back deliveries of <link _top>manganese alloys and some <link _top>ferrosilicon into the first quarter. "I've got more than enough material because our production has fallen off a cliff this quarter and so has our orderbook," the consumer said. "Up until September, we thought we'd been conservative in booking the amount of alloys we needed, thinking we'd have to go on the spot market. Up until September, we'd been taking maximum volumes. Now we don't need this stuff."

He said he was working to come to an agreement with his suppliers over postponing deliveries of material the company was obliged to take before the end of this year into the first quarter, "otherwise it's going to kill our balance sheet at the year end."

"It means we probably won't have to buy much material for the first quarter of next year -- maybe a few spot loads," he said, adding that he was hoping not to have to push deliveries back beyond February.

Traders confirmed that they had seen several customers seeking to postpone deliveries. "We've had quite a few customers trying to do this," said one trader. "We understand the situation they're in. We're all in this together, but we are determined to make sure they do stand by their contracts, even if the deliveries are delayed, rather than walk away from them," he said.

The trader noted that the <link _top>carbon steel industry in the US had made huge profits in the last two years. "It's not like they were six, seven and eight years ago, when the industry was bankrupt, so it's perfectly reasonable to expect them to honor their side of the contract," he said.

But he cautioned that the negotiations could prove fraught in some cases. "I think it's going to keep the lawyers busy for many years to come," he said, but added that he had not seen any evidence of any steel mill trying to walk away from contractual obligations or trying to cancel contracts.

Another trader said he had experienced the same thing with his customers. "It's not just one or two, several mills are trying to do it he said. It's <link _top>ferromanganese, <link _top>ferrochrome, <link _top>ferrosilicon, not so much on silicomanganese, at least not in my experience," he said.

"It's going to cost us money, for sure. We're going to lose money. "There's extra warehousing costs and there's the strain on cash flows and on our year-end inventories. But in the interests of long-term relationships with customers, we have to work with them," said the first trader.

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