As a reaction to the fact that South African producers have lost profitability for production of ferrochrome, they are endeavoring to export chrome ore. The current price of chrome ore exported from South Africa has ensured its profitability, because China has been importing positively chrome ore as the largest market. South Africa exported 4,958,000 tonnes of chrome ore in 2010, in comparison with 5,542,000 tonnes exported in 2009, and the unit price of South African chrome ore averaged on exports in 2010 was USD 227.77 per tonne of material on FOB base. For a reference, the averaged unit price of chrome ore exported from South Africa in 2009 was USD 129.04 FOB. When a scale to produce ferrochrome in South Africa shrinks or a growth of this industry slows down, South Africa has to export more chrome ore as raw material for production of ferrochrome to overseas countries, particularly for China.
On the other hand, the compensation for an increase in export of chrome ore is to move the exportable price of chrome ore to a large extent. The current exportable price of South African low grade chrome concentrate (with Cr2O3 of 44%) is on a level of USD 185 to USD 195 per tonne FOB, although the price in January of 2011 was on a level of USD 265 to USD 285. Therefore, the current price has fallen by 30% from the high one. China is the largest country to consume chrome ore and the quantity of chrome ore to be imported by China has been influencing on price of chrome ore. At present, China has held the excessive stocks of chrome ore stored at wharves in discharging ports, corresponding to the quantity to import in several months, and China has to restrict their new imports of chrome ore for the time being. Accordingly, the international price of chrome ore has fallen.
In June of 2010, when the exports of chrome ore from South Africa to China surged, the price of South African chrome ore was USD 190 per tonne FOB but, reflecting a boom for exports of chrome ore from South Africa, the price of South African chrome ore had risen to USD 285 per tonne FOB in January of 2011. However, when South Africa rushes to export chrome ore, the international price of South African chrome ore weakens. According to the statistics released in South Africa, this country exported 2,393,000 tons of chrome ore in January to May of 2011, having had a considerable increase of 25% compared to that in the same period of 2010.
According to a presumption by an analyst, on the basis of the figures produced in 2010, the current quantities of ferrochrome produced by main countries of the world are estimated as South Africa: increased by 1%, China: increased by 15%, India: increased by 9% and Kazakhstan: increased by 5%. The world production of ferrochrome in 2011 is anticipated to come up to 3,500,000 tonnes by an increase of 10% from that in 2010. Therefore, the production of ferrochrome in South Africa will have a low growth in 2011.
In South Africa, in addition to chrome ore produced by ferrochrome producers, specialized chrome mines produce chrome ore and platinum mines produce UG 2 grade ore as by product. The exports of chrome ore from South Africa have shared 75% in total of chrome mines and platinum mines and only 25% by ferrochrome producers. However, in view of the facts that the growth in production of ferrochrome has slowed down and the market prices of ferrochrome have been depressed, ferrochrome producers of South Africa are moving to the structure to convert their production item to manganese ferroalloys or to reduce their production of ferrochrome. These movements will cause to have a surplus of chrome ore, which has to be exported from South Africa.
Having left one new and large electric furnace installed at Machadodorp plant to produce ferrochrome, Assmang is converting three electric furnaces to produce ferromanganese. The consumption of electric power for production of ferromanganese is lower than that for production of ferrochrome and, under the limited supply of electric power, Assmang is able to elevate the productivity by means of producing more ferromanganese. Assmang has developed the Dwarsrivier chrome mine for their Machadodorp plant to produce ferrochrome but it is questioned whether chrome ore from this mine destines hereafter to export or not.
The cost to export chrome ore from South Africa is definitely advantageous in comparison with that for ferrochrome. The cost to mine chrome ore by opencast mining is on a level of USD 50 per tonne and the charge to transport chrome ore from mine to shipping port by railway is estimated to be lower than USD 60 per tonne and, even in case of transporting by trucks, the charge will be approximately USD 100 per tonne. The exportable price of South African chrome ore is falling but a profitability is still favorable for chrome ore in comparison with that for ferrochrome.
Nickel producers of the world have been influenced indirectly by nickel contained pig iron produced in China, which is being expanded and sold at discounted prices. China has been increasing their consumption of nickel (estimated at 540,000 tonnes per year) but a fairly part of this nickel consumption is thought to have been covered by nickel contained pig iron (anticipated to produce 240,000 tonnes per year on nickel content base) produced in China, because the imports of nickel from the western countries into China are unable to increase. The production of ferrochrome in China is not an exceptional case. China is anticipated to produce 13.50 to 14.00 million tonnes of crude stainless steel in 2011 and the consumption of ferrochrome in China for 2011 is supposed to be on a scale of 4,300,000 to 4,400,000 tonnes on an annualized base. Nevertheless, China is expected to produce 2,300,000 tonnes per annum of ferrochrome in 2011, which will increase by 15% compared to that of 2,000,000 tonnes produced in 2010.
China imported 1,820,000 tons of ferrochrome in 2010, which decreased by 16.4% from that in 2009 but still approached a level of 2,000,000 tonnes per annum in comparison with 792,000 tons imported by Japan, 521,000 tonnes by South Korea and 423,000 tonnes by Taiwan. China imports ferrochrome on a scale of 2,000,000 tons per annum and this reality is an important matter for South Africa and India as main producers of ferrochrome in the world. On the other hand, the prices of ferrochrome prevailing in China are extremely low and this aspect has put a substantial influence on the international prices of ferrochrome. The price of charge chrome purchased by major stainless steel companies of China is on the level of 95 to 97 US cents per pound of Cr (value added tax is unpaid) and this price level has influenced on spot price to be negotiated in Europe.
The benchmark price of South African charge chrome for shipments in July to September 2011 quarter has been settled by a reduction of 15 US Cents per pound of Cr and this reduction is thought to have been substantially influenced by the spot prices in China. China launched to export stainless steel products to Europe from 2010 and is expanding the exports. The matter in question is the prices to be paid for ferrochrome as raw material for production of stainless steel.
(Sourced from TEX Report Limited)
