Questions Over Future of the Ferro Chrome and Chrome Ore Market

Posted in Industry News on 25th August 2011 |

There has been a lot of recent talk in the industry about the future of the Chrome Ore and Ferro Chrome market. South African producers are facing the quadruple whammy of increased production costs, power rationing, reduced ferro chrome prices and higher volume exports of chrome ore to producers and competitors in China. Paradoxically, many South African miners and producers are forced into the export of ore for much needed extra revenues, at a time when many plants are only producing at 50% of capacity.

This has resulted in calls for coordinated action by the South African government to increase export tariffs or ban ore exports. To be effective, this action would have to be coordinated with other major chrome ore exporters such as India and Zimbabwe. However, many market commentators in China argue that if only a few chrome ore exporters impose tariffs or bans, then other chrome ore exporters will benefit from increasing their exports to China. It is also true that all the talk in previous years by ore producing countries came to nothing.

Since 2008, South African producers have been hit by large energy price increases and power curbs from Eskom, the state run monopoly energy provider. Eskom currently struggles to satisfy power demand during the South African winter months and many producers plan shutdowns, maintenance and furnace relines during this period. The power shortages have been caused by a series of planning delays during the attempted privatisation of Eskom in the late 1990s, and although capacity is expected to double to 80 000MW by 2026, shortages will persist for some time.

So it would appear that the South African chrome industry is at a crossroads, especially if the weakness in ferro chrome prices continues into 2012. With hundreds of millions invested in production capacity in South Africa and over 50% of the world's total chrome reserves, consolidation and rationalisation may be on the cards to concentrate production on the most efficient, low cost production.

What's your view on the chrome market?

Please feel free to comment below. It's quick and easy and you just have to leave an email address or sign in with your facebook, twitter account etc.

Tags: China, Chrome Ore, Energy, Ferro Chrome, South Africa, Tariffs, Zimbabwe