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Ferrochrome Industry - In Search For Measures of Regeneration (Part 2)
= Green/brown-field plans to come on stream in 2013; Cr ore export ban calls may end with no effective measures =
In China there are a lot of green/brown field plans (including several desk plans) of ferrochrome production, despite that some domestic smelters are operating in red. Recently Mintal group announced that it would construct a green-field smelter by 2013 in Baotou, Inner Mongolia, introducing a technology from Outokumpu, Finland. From South Africa where power supply restriction would possibly continue until 2018, a chrome miner, Tharisa expressed its plans to embark on operations in China, including a joint venture plan to construct a ferrochrome smelting facility in Fujian.

Besides, there are plans by the existing ferrochrome producers. Kazakhstan's ENRC plans to expand production by 440,000 tons per year at its Actobe plant in 2013, while South African Xstrata will complete construction of Lion project phase 2 to increase production by 350,000 tons per year. India also, which aims to become one of the big nations of producing stainless steel, have various kinds of plans to increase domestic ferrochrome productions, based on the forecasted sharp growth of domestic consumption in the near future.

World stainless steel production is forecasted to amount to 34 million tons in 2011, up by 3 million tons (up 8.8%), and in 2012 it will increase further by 7%. On this growth forecast, the expansion plans as mentioned above started. On the other hand in Europe, there has arisen a problem that about 1.5 - 2.0 million tons of stainless steel production capacity is regarded as surplus, mainly because of the production increase in China and in India which will continue at least toward 2012. Unavoidably therefore integration is the current big issue being discussed in the industry. And, ferrochrome industry cannot help getting involved in the hegemony shift in stainless steel production.

The reason why ferrochrome producers have failed to stay well-off even demand for the alloy has been growing and forecasted to grow even further, is partly because of the hegemony shift as said above, and in addition, of the increasing power cost. In South Africa, power price is planned to increase by 20 - 30% on yearly basis by the public power corporation, ESKOM. Currently power rate there is about US6/kwh, which will be, if ESKOM's plan is introduced, as high as US13.5/kwh in 2015, almost equivalent to the current power rate in China. The power cost in South Africa was, some years ago, the lowest in the world but it will most probably be more than doubled in 3 - 4 year time, because (i) ESKOM failed to react on a timely basis to the changes in social structure, (ii) coal price went up sharply onstronger world demand, and (iii) demand for power grew more quickly than expected as living standard goes up.

In order to reconstruct the ferrochrome price structure and to retrieve the advantageous position, it is one of the effective measures for the South African ferrochrome producers with abundant ores in hand to control ferrochrome production in China by restricting or banning exports of chrome ore, but there have been only appeals without concrete regulations legislated in South Africa so far.

The reality is however that export of chrome ore from South Africa is as much as 3 million tons/year by many mines of various scales, of which smaller ones have no choice but to export their products (chrome ore), as domestic ferrochrome smelters mostly have their own mines. Moreover, it is far more profitable to export ores rather than exporting ferrochrome. Current price of chrome concentrates (Cr2O3: 44%) is US$190 - 200/dmt FOB, while mining cost is US$50 - 80/dmt ex. mine. This ensures the miners to secure good profit after paying the inland transportation, even by trucks. So, it is not easy for the ferrochrome producers to totally ignore the voices from chrome miners and to push forward the plan of export restriction. Therefore, some well-informed local sources say the government can at most react only superficially against the restriction calls just for "degassing", and it is unlikely that the South Africa will embark on legislative action to restrict ore exports, such as export duty, export ban, etc.

India also holds an influential power over China through the ore exports. Unlike South Africa, India's ore reserves are limited and therefore Ministry of Steel, representing the voices from steel inductry, is leading the appeal of restriction. If the restriction appeal is approved, China will receive some damage by not receiving the high-grade ore from India, because China's ferrochrome producers have been blending ores from South Africa (low-grade) and ores from India (high-grade) to meet the required ferrochrome specifications. The high-grade ores from Kazakhstan and Turkey are also good for the blending but they are not sufficiently available. Nothing has been concretely decided by MMTC, the responsible organization to control exports at this moment except that there seems to be new, with unknown details, measures to control the ore exports to be applied to the shipments from this quarter (October - December).
last modified : Thu 27 Oct, 2011 [11:14]
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