The Minerals Council South Africa represents companies that are involved in primary chrome ore mining, that produce chrome ore as a by-product of platinum mining and the integrated ferrochrome producers.
The Minerals Council has an active Chrome Leadership Forum where several challenges facing the value chain, and potential solutions have been discussed.
About 80% of the world’s annual chrome ore production is used in the production of stainless steel.
South Africa produces about 1% of the world’s stainless-steel production of 52 Mt, which is dominated by China with a 56% share. South Africa accounts for 200 Mt or 35% of world’s known chrome reserves (economically recoverable) and 70% of world’s chrome resources.
Over the past decade the South African chrome ore mining business has grown strongly with primary chrome ore exports rising from 4.7 million tonnes in 2010 to 14.1 Mt in 2019.
If chrome produced as a by-product of PGM mining is included, South Africa accounted for 78% of primary chrome ore world supply in 2019.
Over the past decade South Africa’s ferrochrome production has risen from 3.2 Moz to 3.6 Mt in 2019. However, despite this modest growth in aggregate terms, South Africa’s share of the world ferrochrome production fell from 47% of the total in 2010 to 25% in 2019. In the past two years nearly 40% of South Africa’s ferrochrome production has either been closed or mothballed.
There are several issues that affect the competitiveness of the entire chrome value chain in South Africa. The significant 523% rise in the price of electricity over the past decade and shortages of electricity supply have affected the production of mining companies and materially eroded the competitiveness of the ferrochrome industry.
Uncertainty of the trajectory of electricity prices and the reliability of supply has had a huge impact on future planning for both the chrome ore producers and for the integrated ferrochrome producers. The fact that large scale electricity users subsidise other users to the tune of R10 billion annually probably adds another 10% on to electricity costs.
The use of the winter peak demand tariff by Eskom also penalises intensive users. More than half of chrome and ferrochrome by volume is moved by road transport and not rail which is more expensive.
Transport and port bottlenecks and high costs have further undermined competitiveness.
The Minerals Council Chrome Leadership Forum is agreed that a toolbox of measures should be implemented to assist the entire chrome value chain to enable further growth of the chrome ore producers and to stabilise the ferrochrome businesses.