Chrome exports from SA – the home to 70% of the world’s known chrome reserves – have taken a dive in the last couple of months, after having grown to more promising levels for the year up to then. According to Sarel Els of Freightmax – which is a forwarder of exports of the beneficiated product, ferrochrome – chrome exports were doing very well, but for the past two months nothing. “The world demand for chrome has basically collapsed,” he said. “I don’t know whether it’s prices or just dropping demand because of the slowdown, especially in Europe, but globally as well.” Andre Ackerman, GM of the Reinhardt Group’s subsidiary, Chrome Carriers, said it certainly was a bit slow, and attributed it to two factors. “All the guys have stockpiled materials. Added to that is the global slowdown which has caused a drop in demand for the finished products, mostly stainless steel,” he told FTW. “There’s an 18 million tonne stockpile in China, for example, and that’s the biggest buyer of SA chrome.” And the sudden slump this year is across the board, hitting both ferrochrome and the unbeneficiated raw chrome ore – with half of the SA exports of the latter that we exported to China having resulted from platinum miners producing chrome as a by-product. Concern about the dropoff in chrome exports started in March, but was related to the export of raw chromite ore, which was threatening to smash the mature ferrochrome market – a trade which contributes R42 billion a year to SA’s gross domestic product (GDP). This led to calls for a government control of these raw chrome exports, similar to those already in place in Zimbabwe. In March, Stuart Elliot, CEO of the black-controlled, JSE-listed Merafe Resources, reported dwindling ferrochrome exports, and told the press that Xstrata-Merafe Chrome Venture had been forced to close five of its 20 furnaces until May 31. He also appealed to government to impose short-term export taxes on unbeneficiated chrome exports in a bid to save the industry. Reports also revealed that SA’s ferrochrome production was being displaced by Chinese ferrochrome production, despite China having no chrome reserves of its own. This rise in Chinese ferrochrome production, it was said, was the result of China importing chrome, with 50% of that chrome ore being exported from SA, where ferrochrome production is being squeezed by soaring electricity prices and uncertainty over Eskom’s ability to deliver uninterrupted power. The Far East press also noted that China’s allimportant stainless-steel makers were reducing purchases of imported SA ferrochrome, and had turned to cheaper Chinese alloy producers who were using this imported, unprocessed chrome ore. The ‘net also revealed that domestic Chinese ferrochrome costs about half of that of imports from SA. China, therefore, was busy adding domestic ferrochrome capacity, with 1.76-million tonnes of new annual capacity coming on stream between 2012 and 2015. To put that in perspective, China imported 409 316t of ferrochrome in last year’s fourth quarter, of which 27 1706t was South African. By the middle of this decade, new Chinese capacity is likely to lead to a global oversupply even if the SA industry closes more furnaces. But chrome ore exports may be choked off if ferrochrome producers are successful in lobbying for a protectionist export tariff of US$100/tonne in their desperate attempt to protect their own businesses from China’s burgeoning chrome refiners. But it seems that it’s not this battle that has triggered this latest slump. Ackerman told FTW that the tax had not yet been imposed, and repeated that it was both raw chrome and ferrochrome exports that were being hit. The global slowdown appears to be the prime reason.
