In the latest issue of our monthly ferrochrome report, we discuss the impact of Zimbabwe’s rising chrome ore exports, China’s continuing environmental crackdowns, and the consequences of low-cost integrated ferrochrome/stainless plants operating outside of China.
Zimbabwe is usurping an increasingly large proportion of Turkey’s chromite market share. The Sub-Saharan nation produces an offering marginally superior to that of Turkey but at significantly lower cost. When market conditions push the retail price of chromite towards production cost, Zimbabwe will be able to comfortably lower prices, while this scenario would close a number of Turkish mines.
Turkish producers report that buying activity is extremely low. Many are accepting offers as low as $265/tonne CIF. The quantity of Turkish ore imported into China has been decreasing for around six years in response to an increasing amount of competing chromite emanating from Zimbabwe.
The end of Robert Mugabe’s administration has been a boon for the Zimbabwean mining sector, with stocks up over 12% since he took office. Additionally, the proposed reinstatement of the chromite export ban aimed at increased sales of refined products has been scrapped. Should President Mnangagwa retain his position in the July 30th elections, we expect Zimbabwe to make serious progress on the road to meaningful industrialisation. However, Chinese firms are already investing heavily in Zim in expectation of a favourable result either way.
Tharisa announced two acquisitions in Zimbabwe in May and June: a 26.8% stake in Karo Mining Holding, and a 90% stake in Salene Chrome located on the Great Dyke. These acquisitions are expected to lead to new chrome and PGM projects in the near future, strengthening Zimbabwe’s position as a major chromite player. Zimbabwe has also scrapped a planned chromite export ban that was an attempt by the African country to increase margins by exporting more refined materials; however, the ban was not supported by South Africa, causing many to feel that it was doomed to fail. In addition, electricity tariffs for chrome miners in Zim have been lowered from 8.7 cents to 6.7 cents per kilowatt-hour in a further bid to revitalise the industry, although the royalty on chrome mining has increased from 2% to 5%.
May and June were characterised by a renewed hope in the ferrochrome market as Chinese steel mills raised tender prices by RMB700 ($106) in response to widespread production shutdowns as environmental inspectors arrived in high-output regions.
Chrome ore prices are expected to receive support from the rising ferrochrome price, but stainless demand remains low and stockpiles in Wuxi and Foshan are still at a high level. The production of low-grade product containing minimal nickel is currently incentivised by the prohibitive cost of nickel, which remains high at $13,970/tonne.
Total chrome ore stocks at Chinese ports briefly crept below the 3m tonnes mark during June but have since returned to 3.16m tonnes. The market remains heavily oversupplied with little buying interest due to the creation of major integrated steel mills with extremely low production costs outside of China. Resultantly, China has become a net importer of stainless products for the first time in around 7 years.
Looking ahead at the forecast…