Benchmark ferrochrome prices in Europe have risen 6.8 percent for the third quarter, South Africa's Merafe Resources said on Tuesday, but analysts said this was much less than expected and shares in the sector tumbled.

The world's biggest ferrochrome producer, Kazakh miner ENRC , shed as much as 11 percent after Merafe said contract prices for the key ingrediant in stainless steel rose to $2.05 per lb from $1.92/lb in the second quarter.

ENRC was down 9.1 percent at 1,211 pence by 1145 GMT, while South African-based International Ferro Metals shed 9.0 percent to 111 pence. Merafe fell 5.9 percent to 4.00 rand.

Merafe's joint venture partner Xstrata was less affected, giving up 3.6 percent to 3,878 pence. Xstrata is one of the world's biggest ferrochrome producers but it sells a range of other metals so ferrochrome has less of an impact on profits.

Analysts had forecast ferrochrome prices would jump 15-20 percent to $2.20-$2.30/lb, said analyst Michael Rawlinson at Liberum Capital.

The news has been taken badly by the market which has been ignoring some of the signs we have seen that to our mind show steel raw materials markets are peaking, he said in a research note.

Prices of ferrochrome surged by 60 percent in the second quarter on the back of power shortages and subsequent production shortfalls in South Africa, the world's biggest producing nation.

Ferrochrome is supplied to European steel groups such as ArcelorMittal and ThyssenKrupp by South African producers including Samancor and Xstrata.

Merafe said in March the outlook for ferrochrome prices in 200

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