Mick Davis, the chief executive of Xstrata, is a big booster of stainless steel. He has to be, since his mining and metals company supplies 26% of ferrochrome purchased by stainless steel firms worldwide. Ferrochrome is a corrosion-resistant alloy of chrome and iron containing 50-55% chrome. Almost 88% of world ferrochrome supply is used to make stainless steel. Approximately 18 million metric tons of stainless steel was produced worldwide in 2001, using more than 4 million metric tons of ferrochrome. In the 1991-2001 period, world ferrochrome production grew 4%-plus annually, supported by 5%-plus growth in stainless steel output. But, high-carbon ferrochrome prices slipped well below 30¢/lb late last year, from highs around 45¢ in mid-1998, amid oversupply caused by the downturn in stainless steel production. Still, Davis believes that prospects for consumption from the stainless sector remain healthy. "More than 60% of stainless steel's end-use markets are growing at a long-term rate of greater than 6% per annum, and the remaining 40% are running at the world GDP growth rate," he says. He also believes the high-carbon ferrochrome market has bottomed and market prices have weathered the worst of the downturn. "We believe the gradual recovery in prices that began this summer will accelerate in the near future," Davis says.

stundza@reedbusiness.com