TEX reported that a reduction of 15 US cents per pound of Cr for the benchmark price of South African charge chrome settled for shipments to Japan in July to September quarter of 2011 has created a considerable stir.
Ferrochrome producers in South Africa have been already suffering from a deterioration of their profitability and this further reduction of price for charge chrome has resulted in driving South Africa producers into a corner but, in order to oppose the spot price of 100 US cents per pound of Cr for high carbon ferrochrome prevailing in Europe and China, major stainless steel companies in such Asian countries as Japan and South Korea are supposed to have agreed to a further reduction of the benchmark price as mentioned above for the purpose of their survival.
However, a possibility, which South African producers shrink their production of charge chrome (to reduce the production as planned) as its profitability has deteriorated and accelerate to export a surplus of chrome ore arisen from this reduction in production of charge chrome, has been pointed out.
In view of the fact that the current production of charge chrome in South Africa is not payable for its cost, some of ferrochrome producers in South Africa are supposed to specialize their business to exports chrome ores rather than exports of charge chrome. The exports of chrome ores from South Africa to China (typical exportable grades are chrome ore with 45% of Cr2O3 and its Fe ratio of 1:1.5 and UG 2 grade chrome ore with 40% maximum of Cr2O3) had once touched a bottom but the route to accelerate exports of South African chrome ores for China has been already set up. However, China has been currently suffering from the excessive stocks of chrome ores and it is difficult to increase rapidly the exports of chrome ores from South Africa to China but South African side has strongly felt a development in exports of chrome ores for China.
The unit price of low grade chrome ores exported from South Africa in the calendar year of 2010 was USD 224.37 per tonne of material FOB on the average (according to the customs statistics released in China, the unit price of South African chrome ores averaged on imports in 2010 was USD 246.80 per tonne of material) but the cost of South African low grade chrome ore is said to be lower than USD 100 per tonne. Therefore, the profitability to export chrome ores from South Africa is overwhelmingly advantageous for enterprises in South Africa. For a reference, South Africa exported 4,958,000 tonnes of chrome ores in 2010, including 3,720,000 tonnes shipped to China.
According to the data compiled and released by Merafe of South Africa, the exports of chrome ores from South Africa expanded by 19.3% on an annualized base in the past years (on the basis of the quarterly movements) and the exports of South African chrome ores broken down by kinds of enterprises were ferrochrome producers increased their exports of chrome ores by 4.5%, independent chrome mines increased their exports of chrome ores by 21.0% and UG 2 grade chrome ore increased its exports by 57.7%.
Even when South African producers of charge chrome exhibit hereafter a positiveness to export chrome ores from South Africa, this movement will become a very cynical phenomenon. The reason is that a main factor, having caused the internationally depressed price of charge chrome, had been said by the exports of low grade chrome ores from independent chrome mines of South Africa and also the exports of UG 2 grade ore produced at platinum mines of South Africa as by product and the case to control these exports was already appealed to the Government of South Africa.
When South African producers continue to reduce their production of ferrochrome or convert their production item from ferrochrome to other item (ferromanganese), the quantity of chrome ore, which has been so far produced for their own consumption, is thought to have a surplus. Therefore, in order to find out its outlet, ferrochrome producers in South Africa will see a possibility to accelerate their exports of chrome ores.
As one of the cases for this movement, Assmang announced a plan to convert three electric furnaces to produce ferromanganese (one electric furnace was already converted to produce ferromanganese), excluding one large electric furnace installed at the Machadodorp plant for production of ferrochrome. Accordingly, the Dwarsrivier chrome mine of Assmang is supposed to have a margin for supply of chrome ore.
Also, TATA Steel of India has shut down their plant, located in Richards Bay of South Africa, for 3 months to implement its maintenance but has emphasized to continue chrome business in South Africa and the executive of TATA Steel said in last week to invest newly in 2 chrome mines of South Africa.
On the other hand, POSCO of South Korea has already established Poschrome in South Africa as a JV company with Samancor Chrome of South Africa with its share ratio of 50: 50 but has acquired in last week a 100% of the shares of Poschrome. However, it is not known yet whether POSCO is able to manage chrome mines in question or not. It is still wondered whether Samancor Chrome will transfer even the mining right of chrome mines to POSCO or not.
(Sourced from TEX Report Limited)
