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Print[Ferro-Alloys.com]The conundrum surrounding South African chrome ore exports proves there are no easy or fast solutions. After the latest proposal to limit exports to over 38% Cr lumpy ore and 40% concentrates, another solution was floated. Suppliers could only export 30% of their production of any grade. However, the proposal was disingenuous.First of all, the fully integrated producers use the majority of their ore internally to produce charge chrome; therefore, the 30% export limit is virtually meaningless. However, the independent miners who don’t have their own smelters would be forced to sell 70% of their output to domestic smelters that would naturally favor their own mine production. Only Tata is a custom smelter that doesn’t have its own mines.
The second issue involves the base line period. Would it be 30% of last year’s mine production, expected 2013 output, or weighted five-year average? Also, what happens if a mine declares force majeure or is forced to close? Will it be able to sell its export quantity to another miner? How will new miners be accommodated?
Can the South African government control the production or will there be a sudden increase in smuggling since it would be impossible to build new smelters given the current power crisis. And, if the ore can’t be sold, will it be stockpiled and later disrupt the market?
“If it was that easy to come up with an equitable and economic system, it would have been done years ago,” one miner complained. “South Africa has to acknowledge that its ore, not the ferrochrome, is the driver. Unfortunately, the smelters are stuck with their plants.”
Meanwhile, most of the South African smelters restarted a few of their closed furnaces when the Eskom buyback program ended on June 1. The smelters, however, were in no rush to disclose how many units they restarted fearing that it would depress the market. “After telling all the buyers they won’t have enough charge chrome in the third and fourth quarters, the smelters don’t want to say how much capacity has been restored,” one supplier quipped.
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