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Harare - Lingering concerns over power supply and high production costs as well as rising export taxes and quotas on chrome ore are dimming prospects of South Africa’s ferrochrome mining sector, a report said on Wednesday.
A second report indicated that exchange rates and global economic conditions will also weigh on the sector this year.
South Africa holds the world’s largest chromium reserves while its northern neighbour Zimbabwe is also a significant player in the chrome mining sector. Zimbabwe is taking over excess land from current miners and will allocate it to new investors this year, which officials expect to boost output.
Restrictive developments in South Africa are expected to impact on the global ferrochrome industry, according to Persistence Market Research's report 'Global Ferrochromium Market Revenue Predicted To Go Up by 2022'.
“The global ferrochromium market can get hampered because of the increase in the export tax and fixed export quotas imposed by South Africa on chrome ore, owing to the concern of losing ferrochromium market to China,” it said.
Chinese companies have established chrome mining and smelting operations in countries such as Turkey, South Africa and Zimbabwe and this is expected to boost the medium- to long-term outlook of the global ferrochromium market.
According to the report, South Africa has a “significant market share in global ferrochromium market but there are concerns of power supply and higher production cost which would lead to the closure of small competitors”.
This will likely slow down the global ferrochromium market. Zimbabwe last year lifted a ban on chrome ore and latest information shows some chrome miners in the country are bringing smelter facilities into operation.
'Mining of Chrome and Production of Ferrochrome in South Africa 2016', a report released on Wednesday by Reportbuyer, a provider of market research reports, said only about four of the seven SA ferrochrome producers are currently operational.
South Africa's chromite mines are operated by a number of smaller companies that focus on the production of chromite and a few integrated ferrochrome producers. These include the Glencore-Merafe Chrome Venture, Samancor Chrome, and Hernic Ferrochrome.
“The pricing of and demand for ferrochrome are influenced by global economic conditions, exchange rates, the demand for stainless steel and chromite supply,” said the report.
In 2015, SA accounted for about 49% of the global total; it has about 41% of the world's total chromite reserves. Department of Mineral Resources data shows that in 2015, 14.6 metric tonnes of chromite worth R16.2bn was sold locally and on the international market.
However, sales of ferrochrome to China, the world's largest consumer of South African ferrochrome, are being “negatively affected by increased exports of South African chromite, which is enabling the growth of the Chinese ferrochrome” industry.
