SA needs more than an export tax to save ferrochrome

THE government’s proposed actions to save the waning local ferrochrome industry will adversely affect the chrome mining sector — a high criticality mineral and one of the few growing segments in the domestic mining industry.South Africa’s chrome sector comprises primary chrome producers that mine and concentrate chrome for export. Companies mining platinum group metals (PGMs) extract chrome as a valuable by-product. Integrated chrome companies mine, as well as concentrate and smelt, chrome to make ferrochrome, which is essential in stainless steel production.South Africa has more than 70% of the world’s known chrome resources and dominates global chrome sales. According to SA Revenue Service data, South Africa exported 20.5 million tons of chromium ores and concentrates in 2024 — a record high for a calendar year, surpassing the 17.8 million tons exported in 2023. Total chrome sales generated R63bn last year, making it the fourth-largest sector in mining by revenue, contributing to the fiscus and sustaining downstream industries. It directly employs nearly 26,000 people.However, an almost 900% increase in electricity prices in little more than a decade in South Africa has resulted in the country forfeiting its leading role as a ferrochrome producer because domestic smelters are no longer competitive, while China — importing South African chrome — is now the largest source of ferrochrome for its stainless steel manufacturing industry.As recently as 2016 South African ferrochrome production peaked at 15 million tons, more than half of global supply. Yet by 2024 output had declined to less than four million tons.In a June cabinet statement the government outlined three interventions for the chrome and ferrochrome industries to arrest the decline in the country’s ferrochrome smelting output. These high-level proposals included beneficial electricity tariffs for smelters, an export tax on chrome leaving South Africa and the requirement that all chrome exporters obtain permits from the International Trade Administration Commission (Itac) of SA.However, the proposed interventions in the chrome ore industry are likely to impose a real cost on the nonintegrated chrome companies, their employees and dependants, as well as mine-host communities. This for a very limited improvement in the cost structure of the ferrochrome smelters, and probably no increase in actual South African ferrochrome production.The mechanism to provide preferential electricity pricing for smelters is unclear, but it would ultimately have to be subsidised elsewhere in the economy. The high and rapidly increasing price of electricity in South Africa is already having a severely negative effect on businesses and households. The economy is stagnating and large industries are shedding jobs, making the juggling act on preferential power tariffs a difficult, if not impossible, one.It is the view of the Minerals Council SA that nonintegrated chrome miners, which rely on exports amid elevated demand from the world’s largest steel manufacturer, are likely to bear the brunt of the adverse effects of these proposed actions. China could respond unfavourably to an artificial increase in chrome prices, which would have knock-on impacts for its ferrochrome and stainless-steel industries and trade relationships.Typically, in the context of an informed industrial policy, export controls and taxes could be designed to funnel more chrome concentrate into local smelters. But many large ferrochrome producers have their own mines and have long-term chrome supply agreements. They are well supplied and even export chrome themselves.Any restriction would therefore not improve chrome supplies to smelters or revive shuttered plants. Instead, it would hit nonintegrated (and possibly all) chrome miners hard, affecting operations, export revenues and related jobs.The post SA needs more than an export tax to save ferrochrome appeared first on Miningmx.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com