consmin chrome ore rockets up

China Buys African, Turkish Chrome on India Tax Rise (Update1)

By Helen Yuan

March 27 (Bloomberg) -- China, the world's biggest producer of ferroalloys, is turning to South Africa and Turkey for chrome ore after India imposed a tax on the mineral to curb shipments.

Chinese steelmakers and traders are increasing purchases of chrome ore from those countries after costs from India increased, said Tu Kun, ferroalloy general manager of China Minmetals Corp., the nation's biggest importer of the commodity.

India, which has less than 1 percent of the world's chromium deposits, supplies one third of China's imports of chrome ores. The South Asian nation imposed a 2,000 rupee ($44) a ton duty on overseas shipments of the commodity from March 1. Higher duties raised costs for Chinese buyers as the nation's economic growth of 10.7 percent last year boosted consumption.

``Chrome ore demand is strong because of increased production capacity of stainless steel in China,'' Tu said at a conference in Hong Kong.

China may boost stainless steel output by 37 percent to 7.35 million metric tons this year from 5.36 million tons in 2006, metal research firm Heinz H. Pariser said last week. Ferrochrome, a ferroalloy combining iron and chrome, can be used to produce stainless steel as a substitute for nickel.

``The Indian government doesn't want to export any minerals,'' said Goutam Dutta, mineral exports head of Tata Steel Ltd., at the conference. Exporters are trying to pass on higher taxes to buyers. ``We will see how things settle.''

Import Surge

China's chrome ore imports rose 40 percent to 4.32 million tons last year, including 1.34 million tons, or 31 percent, from India. About 18 percent were from Turkey and 17 percent from South Africa, according to customs data.

``Chromium prices will remain high in the second quarter'' as Chinese demand keeps rising and exporters may impose more measures to curb shipments, Tu said. Prices could be more volatile in the third quarter as Chinese stainless steel producers may cut back production, he added.

Minmetals plans to boost chrome ore imports by 67 percent to 1 million tons this year, according to Tu.

To contact the reporters on this story: Helen Yuan in Hong Kong at [email protected] ;