Commodity outlook
Chrome ore witnessed challenging market conditions in 2012, especially during 2H12. There was a fall in ferrochrome prices
due to renewed concerns over European debt, general global economic weakness, weaker stainless steel demand and lack of producer discipline in South Africa.
Ferrochrome prices showed a modest increase of 2.5 cents to 112.5 cents/lb during 1Q13. Spot prices in Europe and China have also recently started rising on increased demand, restocking, higher nickel prices and some anticipation of producer cutbacks in South Africa as they enter another round of power buyback deals with Eskom (South African Power Utility).
Ferrochrome prices are expected to rise modestly during 2Q13 to 120 cents/lb as the Eskom buy-back deals start, and then remain unchanged throughout the remainder of the year. As per consensus price estimates, the yearly average prices for chrome ore and ferrochrome are expected to increase to US$219/t and 120 cents/lb, respectively, during 2013.
The prices are expected to further increase in 2014 and then remain steady till 2016. South African producers are expected to remain under cost pressure as the South African Rand appreciates. With Eskom buy-back agreements coming into implementation and the prevailing labor situation, South Africa is expected to witness only a modest production growth during 2013.