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South Africa’s once mighty chrome-to-ferrochrome industry, now threatened by an unexpected local oversupply of raw ore, is looking to get itself back on its feet by emulating what the Canadians did 40 years ago for their then teetering but now thriving Saskatchewan potash industry.
South Africa’s ferrochrome business is losing market share to China hand over fist and has been forced to temporarily shut furnaces left, right and centre.
Once the proud holder of a 50% share of the global ferrochrome market, the local industry now finds that China is stealing the show – ironically, with the help of South African ore.
China hosts no chromite deposits of its own, but imports the ore it needs from a string of countries. Indian chrome miners used to provide China with the lion’s share of the ore needed, but have been prompted by government regulations to convert the chrome into ferrochrome at home before exporting it.
Now that gap is being filled by South Africa’s upper group two (UG2) oversupply, causing the local ferrochrome business to come a cropper.
It now wants two forms of help – the first quick and temporary and the second long-term and permanent.
It wants the South African government to enforce a $100/t export duty on raw ore in the short term and help to create a chrome ore marketing arm that takes its cue from Canada’s Canpotex model for the longer term.
The Canadian government faced a similar situation – a long-term potash price depression – when it formed Canpotex in 1972, which today describes itself as a marketing and logistics company that sells and delivers Saskatchewan potash to international markets as a wholly owned entity of potash producers.
“The Canadian potash industry provides an excellent case study,” says the South African ferrochrome industry in a brochure handed out last week to analysts, investors and journalists at the presentation of the results of the black-controlled Merafe Resources, which is part of a chrome-to-ferrochrome venture with the London-listed and South African-led Xstrata, the world’s biggest ferrochrome producer.
The extraordinary growth in ore supply from UG2 tailings will result in a potential six-million-ton oversupply of metallurgical-grade ore by 2014.
For the rest of this article, please go to the MineWeekly.com website: http://www.miningweekly.com/article/south-africas-stricken-ferrochrome-industry-eyes-canadas-canpotex-as-potential-turn-around-model-2012-03-16