Alloys & Ores

UG2 Chromite White Paper



UG2 Chromite White Paper (October 2015)


Since the depletion of the Merensky reef, more and more South African platinum miners started mining from the UG2 reef. This seam is characterised by high levels of low grade chrome ore (UG2). Traditionally, platinum producers would stockpile this resource as waste material. However rising platinum mining costs and increased smelting capacity in China, enabled UG2 chrome to be sold as a by-product. The availability of UG2 chrome ore has upset the balance in the South African and global chrome ore market. As UG2 chrome ore mining is essentially regarded as ‘free revenue,’ platinum producers were not as price sensitive as a traditional chrome ore exporter which provided UG2 producers with both a price and cost advantage over traditional chrome ore market players. There have been numerous studies attempting to quantify the level of UG2 chrome ore production, but as this information is closely held, these reports have often grossly misdiagnosed the significance of this ore. Moreover, as these reports have typically been authored by industry participants, these finding could not be classified as independent. This white paper bases its estimates on primary industry sources, public data and non-public data sources and quantifies the volumes of UG2 chrome ore as a percentage of China’s overall chrome ore imports. As such, Core Consultants has been able to accurately and independently analyse and assess the impact that UG2 chrome ore has on the future of South Africa’s chrome and ferrochrome industry.



1. Introduction
2. Factors driving the market for cheap ore
3. UG2 local vs. export consumption
4. Conclusions

1. China’s ferrochrome capacity
2. China’s chrome ore imports
3. China’s chrome ore imports from South Africa
4. Offshore quotations of South African chrome ore to China
5. Chinese domestic ferrochrome prices
6. Chinese ferrochrome production
7. South African electricity capacity margin
8. Cost inflation in the platinum sector
9. PGM cost curve based on cash costs and sustainable costs
10. Global platinum production and probability of closure
11. UG2 chrome ore supply estimates
12. Estimate of chrome ore consumption by South African furnace
13. Total domestic UG2 consumption as a proportion of overall chrome ore consumption
14. South African consumption
15. South African ore exports by type including MG/LG exports, UG2 exports, ROM exports 16. UG2 chrome ore production vs. platinum supply
17. UG2 capacity expansion profile
18. UG2 capacity expansion (2015-2016)

Lara Smith

Lara has been an analyst for over ten years, starting her career as an equity analyst at Foord Asset Management and more recently as the lead analyst at Steinmetz Group, where she was responsible for sourcing, analyzing and evaluating potential mining acquisitions in Africa and the Baltic regions. – Read More


Release Period: Once off
Last issue release date: May 2016
Next issue release date: May 2016






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