It is reported that ferrochrome producers in South Africa want export measures to protect their own businesses from China's burgeoning chrome refiners.
A vital revenue stream for platinum miners chrome ore may be choked off if ferrochrome producers are successful in lobbying for a protectionist export tariff of USD 100 per tonne in their desperate attempt to protect their own businesses from China's burgeoning chrome refiners.
Platinum mines in SA are shutting down and projects are being mothballed because of high input costs and stagnant prices in an oversupplied market. But there is money to be made from the chrome found in platinum miners' discarded waste after the platinum group metals have been extracted.
A reef stretching across North West, Mpumalanga and Limpopo, contains the world's richest source of UG2 (upper group 2) platinum and chrome deposits. The raw product is smelted in an electricity intensive process and converted to ferrochrome, an alloy used to make stainless steel.
SA is a leading ferrochrome producer through local refineries, but China is catching up, growing its market share to 35% last year from below 10% in 2001.
Ferrochrome producers, who have invested ZAR 3.5 billion a year in their businesses since 2006, argue that the Chinese growth is at their expense, as China uses South African chromite ore, a practice they want to be stopped. Revenues generated from chrome are by product credits, bringing down the cost of platinum production in an extremely difficult market.
Platinum miners are increasingly putting chrome recovery plants on the back ends of concentrators. Chrome accounts for about 200 kilogram per tonne in their tailings.
Anglo American Platinum said recently that its chrome strategy was to create maximum value to the platinum group metals business by using the revenue generated by UG2 chromite to offset the platinum group metals mining costs in order to be the lowest cost platinum producer.
Anglo American Platinum, which has 640 million tonnes of UG2 chromite rich reserves, is reviewing its business to restore profit margins. It is widely expected that the review will result in shaft closures, mothballed joint ventures or possible asset sales. It forecast it could grow UG2 chrome ore volumes to 2 million tonnes in 2013 from 340000 tons in 2010.
Anglo American Platinum argued that as long as China could not buy competitively priced ferrochrome, it would continue importing chromite ore to make its own.
SA has lost its cost advantage on ferrochrome output because of electricity prices doubling and above-inflation wage demands. What the ferrochrome business needed was sufficient, fairly priced electricity and an agreement with UG2 producers to sell their chromite ore at a reasonable price.
China imported 4.7 million tonnes of chrome ore from SA in 2011, out of its total imports of 9.4 million tonnes. It takes about 2.5 tonnes of ore to make a tonne of ferrochrome.
Ferrochrome producers are anxious that, if the USD 100 tariff is imposed, China may reciprocate with a tariff on ferrochrome imports from SA, making their own ferrochrome more expensive and by extension raising the price of stainless steel.
Source – Business Day
http://www.businessday.co.za/articles/Content.aspx?id=174230
