UPDATE 2-Intl Ferro Metals moves to FY loss, outlook upbeat

* Loss per share 66 South African cents vs EPS 114.05 cents

* Confident resumption in demand, prices are sustainable

* Sees ferrochrome prices rising in Q4

* Scraps dividend

(Adds details from call, share price, analyst comment)

LONDON, Sept 14 (Reuters) - South Africa's International Ferro Metals Ltd (IFL) (IFL.L) swung to a full-year loss on lower ferrochrome output and prices, but said it was confident a recent recovery in the stainless steel ingredient is sustainable.

It moved to a loss per share of 66 South African cents ($0.09) in the year to end June from earnings per share of 114.05 cents the previous year.

"The year under review was very challenging for IFL as demand and prices plummeted from the previous year," said Chief Executive David Kovarsky.

"We are confident that the recent resumption in demand and stronger ferrochrome prices are sustainable and IFL is back on track to take advantage of this with an improved cost base."

Shares in the London-listed company were down 1.3 percent at 59 pence at 0757 GMT on Monday, slightly outperforming a 2.0 percent fall in the UK mining index .FTNMX1770

Investec Securities called the results disappointing. "However, in our view, the market is looking through these numbers to recovery in FY10," it said in a note.

Ferrochrome had been hit hard by the global downturn and International Ferro Metals slashed its full-year production in response. [ID:nLH64396]

The European contract price for ferrochrome jumped 29 percent to 89 cents a pound for the third quarter, but was far short of the record $2.05/lb in the year-earlier quarter. [ID:nLQ661451].

STAINLESS STEEL REVIVAL

IFL said the pick up in prices since May is a result of the production cutbacks from ferrochrome producers and a revival in stainless steel production in China and, more recently, Europe.

"The United States and Japan are lagging these economies in terms of their recoveries, but stainless steel production in these markets is picking up."

It sees ferrochrome prices rising in the fourth quarter on tight supply and costs pressures, said Kovarsky on a conference call. He noted that current industry expectations are for prices in the fourth quarter to rise above $1.05 a pound.

"There may be a slight overstocking in China but it's not material...and it shouldn't affect overall demand for ferrochrome," he said.

Investec said 4Q benchmark ferrochrome price of less than $1.09/lb will be a disappointing outcome for ferrochrome producers.

IFL has responded to the improving conditions by resuming production from both of its furnaces and said output in the fourth quarter of this year should be good as both furnaces operate at full capacity.

However, it warned of cost pressures as electricity prices in South Africa have jumped more than 40 percent in the company's current financial year and the rand has continued to strengthen against the dollar.

"Because these cost pressures are common to all South African producers, who supply most of the world's ferrochrome, a case can be made for further price rises in the product."

Kovarsky expects electricity prices to increase about 30 percent next year.

The company, which paid a maiden dividend of 1 pence ($1.7) last year, said it would not pay a dividend this year. (Reporting by Julie Crust; editing by Paul Sandle and Andy Bruce) ($1=7.527 South African Rand) ($1=.6027 Pence)