S.African mine labour strife halts slide in chrome – by Harpreet Bhal and Silvia Antonioli (Reuters.com – September 26, 2012)

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LONDON (Reuters) – The impact of South African mine labour unrest has spread beyond precious metals to UG2 chrome ore, a by product of platinum and key ingredient in stainless steel, with output cuts putting a floor under prices after four months of decline.

In recent months, violent labour unrest over pay has disrupted production at some of the largest South African platinum mines, including those owned by Anglo American Platinum, Lonmin and Aquarius Platinum.

South Africa accounts for more than 80 percent of global platinum supply, but it also produces over half of the world’s chrome. Both markets are in global surplus, but uncertainty created by production cuts has induced fresh buying.

Although disputes at some south African shafts have been resolved, strikes are in full force at others and continuing to spread, raising worries that prolonged disruptions might hit production further.

So far strikes have cut output of UG2 chrome ore by about 150,000-250,000 tonnes, market players said, a significant enough amount to have an effect on prices, even in an over supplied market.

“The strikes in Lonmin have removed about 100,000 tonnes a month of UG2 which is no small amount,” said a European ferrochrome trader, adding an additional 50,000-80,000 tonnes have been cut due to strikes at other mines.

PRICE FLOOR

The reduced output has stemmed a 4-month price decline in ferrochrome – the processed product of chrome, with projections now looking at rising values even though economic slowdown has depressed demand from stainless steel makers, industry players said.

Prices of high carbon ferrochrome in Europe stand at around $1.02-1.10 per lb in Europe, with low carbon material selling at between $2.05 and 2.10 per lb.

Prices have fallen by around 10 percent in the last four months.

“There is an output reduction although it is difficult to assess how much; this has already been priced in platinum but not in the chrome and ferrochrome yet,” an industry source said.

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