16th July 2013

KPMG Commodity Insights Bulletin Chromite – July 2013

posted in Chromium/Platinum Group Metals |

http://www.kpmg.com/ca/en/

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.

In the medium term, ferrochrome demand is expected to be driven by the global stainless steel demand which is expected
to increase at a CAGR of about 4.3 percent over the next five years. This has been shown in Figure 2. This growth rate is
expected to be driven by increased demand coming from Asian countries especially the growth in Chinese steel demand. The
APAC, EMEA and Americas regions are expected to witness a steel demand growth rate of about 4.9 percent, 3.2 percent
and 2.8 percent respectively till 2017.

Supply and Demand

Global demand for chromite is primarily driven by ferrochrome demand which is used for production of metal alloys. During
2012 about 69 percent of the globally produced chromite was used for the stainless steel production alone while 27 percent
of the globally produced ferrochrome was used for alloy steel production.

For the rest of this document, click here: http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/commodity-insights-bulletin/Documents/chromite-q3-july-2013.pdf

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