RPT-UPDATE 1-Ferrochrome Q3 contract price jumps 29 pct to 89cts

(Adds third quarter in para 1, details, analyst comment, background)

By Eric Onstad and Pratima Desai

LONDON, June 26 (Reuters) - The European contract price of charge ferrochrome surged 29 percent to 89 cents per pound for the third quarter of 2009, producers said on Friday, but analysts said this was unlikely to be a big enough rise to restart shut operations.

News of the jump sent share prices of ferrochrome firms higher, with South Africa's Merafe Resources (MRFJ.J) up 7.2 percent at 1.04 rand and International Ferro Metals up 4.0 percent at 39 pence by 0746 GMT.

Anglo-Swiss Xstrata (XTA.L) and Kazakhstan mining group ENRC (ENRC.L), the world's two biggest ferrochrome producers, gained 3.7 percent to 694 pence and 3.1 percent to 685.5 pence respectively. This compared to a 1.7 percent increase in the UK mining index .FTNMX1770.

The price of ferrochrome, a key component in stainless steel, had been expected to rise partly because of higher electricity costs and a stronger currency in top producer South Africa. [ID:nLF494056]

Producer sources told Reuters about the 89 cent settlement, up from 69 cents in the previous quarter, which was later confirmed by Merafe, a joint venture partner with Xstrata.

Ferrochrome producers have shut down large amounts of capacity in the wake of the global financial crisis that has hammered demand for steel.

The price of ferrochrome had tumbled from $2.05 per lb in the third quarter of last year as demand for steel plummeted.

Analyst Michael Rawlinson at Liberum Capital in London said about 70 percent of South African ferrochrome capacity was shut down, but the price rise was not likely to spark a wave of reopenings.

"Since it barely offsets rand appreciation, this price rise will be insufficient to incentivise South African producers to restart widespread production, but it will assist operating margins for those lower cost producers still operating," he said. (Editing by James Jukwey)