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Strikes at Mines in South Africa Being Protracted May Affect Benchmark
=Cr ore production as well as UG2 production from PGM may be affected, too=
Last week, mine workers' strikes occurred at 3 chrome ore mines owned by Glencore Xstrata plc in South Africa, and it is not yet in sight as of June 5 when the strikes will be over. Albeit the Company made a comment it has ore stocks enough to ship for refining purpose as well as to usual customers, if the strike gets protracted as it is, the ore will run short and it becomes a likely case the negotiation on benchmark price for South African charge chrome will be also affected.

Currently in South Africa, in addition to the aforementioned chrome ore mines, the strikes occurred at plural platinum group metals (PGM) mines, and the fear has been voiced the strike will spread and get protracted. Although Mr. Jacob Zuma, President of South Africa tried to sort out the mess last Thursday, the things have rather got aggravated further as far as the present situation is concerned. The production cost of charge chrome of a joint venture of Glencore Xstrata plc and Merafe Resources Ltd. is commented as being the best among the same alloy producers in South Africa, and it is an advantageous point that it owns a power generation plant and chrome ore mines. However, just in case the miners' strike gets protracted, the production cost will go up because it has to purchase ores from outside mines. Besides, there are many users in South Africa as well as overseas countries for UG2 which is a by-product of PGM production and used as a cheap chrome ore. However, the protracted miners' strike will lead to the decrease in production of UG2 and resultingly push up the price of chrome ore. The price hike of ore as raw materials in addition to a comparatively high price of electricity in July - September (seasonal factor in winter) is likely to push up the production cost of South African charge chrome.

In the meantime, the decrease in production of cheap UG2 will alter the demand map for charge chrome. China produces high-carbon ferro-chrome at a cheap cost by importing UG2 in large quantities and consumes it within the country. Hence, the import quantity of charge chrome has decreased year by year, but if the absolute quantity of supply of predominantly UG2 and chrome ore decreases, there is a possibility the import of charge chrome (or high-carbon ferro-chrome) will increase. In case the mass-consumption countries purchase charge chrome energetically, the market price will go up drastically.

The price negotiation on the benchmark in the period from July to September for South African charge chrome is scheduled to start within this month. On this occasion, if the miners' strike shows a trend for being protracted, it is obvious the producer side will handle this as a factor for demanding a price hike, and the focus is to be on the progress from now.

In this regard, Association of Mineworkers and Construction Union (AMCU) which is leading a strike this time is a union which has been expanding its influence replacing National Union of Mineworkers (NUM) and has a strong influential power among mine workers. As AMCU is in rivalry with NUM which is a part of supporting base for Mr. Zuma, President of South Africa and the current ruling party, the approach by the President has not been so effective. Although the President showed a strong attitude in the speech last Thursday while referring to the selection of 'Zero tolerance approach' (implementation of severe punishment), it seems to take a time further the strike will be over.
last modified : Thu 13 Jun, 2013 [14:42]
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