Note: CSM is the only producer of Cr2O3 in Australia, the deposit at Coobina is likely to finish in 4-5 years. Most of the world reserves are in RSA. The only companies on the ASX with any chance of producing Chrome ore are RML and CCI.
Outlook Of Ferro-Chrome Market By Kermas = No Objection To Regulate Exports Of South African Chrome Ore Dr. Danko Konchar, CEO of Kermas and Samancor Chrome of South Africa, came to Japan and had an interview with our pressman ( Mr. H. Saitoh ) on the 11th of October at Imperial Hotel in Tokyo. In the form of answering to the queries placed by Mr. Saitoh, Dr. Konchar commented on changes of ferro-chrome situation in the world as follows.
In the course of this meeting, Dr. Danko Konchar pointed out following matters ; (A) Since the production of stainless steel in China has shared an important position in the world, a time to review thoroughly prices and supply / demand of ferro-chrome is thought to have come, by departing from a preconceived idea., (B) Kermas had once objected to the regulations for exports of South African chrome ore but, by attaching an importance to the domestic interest in South Africa, Kermas does not object to regulate exports of chrome ore from South Africa., (C) Owing to the fact that international prices of ferro-chrome have risen to a substantial extent, our company has strengthened the power for financing and it has become easy to raise funds at stock market., and so on.
(1)The world market for low carbon ferro-chrome is very small in comparison with that for high carbon ferro-chrome but, as far as it is said that the consumers concerned have been highly interested in prices of low carbon ferro-chrome, it is thought that the issue of the low prices for low carbon ferro-chrome as prevailed in the past years has now come up to the market The cost to produce low carbon ferro-chrome is said to be a double compared to that for production of high carbon ferro-chrome and the prices of low carbon ferro-chrome as seen previously have not been high enough for its production cost but the producers reluctantly accepted the low level. The reason, why supply of low carbon ferro-chrome has tightened, is due to the difficulties to increase production of low carbon material but also has reflected the needs from steel mills, which require special grade low carbon ferro-chrome with lower contents of sulfur, phosphorus. titanium and silicon. A decrease of the stockpiled low carbon ferro-chrome by DLA of the USA is an anxious factor for the consumers concerned in Europe and the USA.
The damage from the accident occurred at our Middleburg Technochrome Plant ( MTC ) was recovered and the operation at this plant resumed last week. This suspension of operation caused a short supply of 8,000 tons. Originally, the orders for low carbon ferro-chrome have been overbooked but a shortage of 8,000 tons has been compensated by the purchases from other producers of low carbon material and, therefore, we are still able to fulfill the deliveries as contracted. The quality of low carbon ferro-chrome produced at MTC ( with capacity to produce 30,000 tons / year ) has had an advantage by taking into account of special grade chrome ore ( with lower contents of sulfur, phosphorus, and so on ) used as raw material but, on the other hand, this chrome ore has contained lower Cr2O3 and, consequently, a negative factor to raise the cost is pointed out in comparison with that for Russian low carbon ferro-chrome.
(2)A dramatic expansion of the market for ferro-chrome in China has been materializing from the beginning of 2007. The scales to produce stainless steel and to consume ferro-chrome in China have been enlarging on an unexpectedly quick tempo compared to those as anticipated at the beginning of this year. China imported ferro-chrome from South Africa with 50,000 tons in 2005 and 100,000 tons in 2006 and is supposed to import 500,000 tons from South Africa in the calendar year ( January - December ) of 2007 ( already imported 320,000 tons in January - August of 2007 ), increasing by 5 times compared to that in the preceding year of 2006. Also, China imported 1,200,000 tons of chrome ore from South Africa in January - August of 2007, having exceeded that ( 870,000 tons ) imported in the preceding calendar year of 2006. In last week, we have concluded the contract to export 250,000 tons of charge chrome for shipments to China in 2008.
In view of rise of China in the chrome market ( importances on supply and demand of ferro-chrome ), a preconceived idea, in relation to the world market, has to change to a considerable extent. For a reference, Kermas so far has no case to make partnership with Chinese enterprise. According to the calculation based on IFM's market capitalization in London, one million tons per annum of ferro-chrome to be produced by our company are equivalent to US$4 billion and, on the basis of this evaluation, we have acquired easiness to raise funds at stock market.
(3)A steep rise of nickel price caused to retreat the demand for nickel-based stainless steel and to decrease the production of nickel-based stainless steel and disclosed the problems in relation to nickel-based products but, at that time, no influence was put on the market of ferro-chrome. The production of chrome-based stainless steel has rather inclined to increase. Namely, the demand for substitutive material has arisen. The world supply of high carbon ferro-chrome ( charge chrome ) at present ( for October - December quarter ) has tightened and the stocks of this ferro-alloy at producers have become very thin. In view of the matters which the exchange rate of South African Rand against US-Dollar has strengthened and the cost to produce ferro-chrome in South Africa has increased ( by 29% in the local currency from June and September ), it is natural to ask for a rise of price for South African charge chrome to be shipped in October - December quarter of this year. The price of charge chrome contracted with Chinese customers has risen to a level of 93 - 95 US-Cents per lb. and price of this ferro-alloy is still on a basic tone to rise further. The Chinese market has now held a powerful strength to influence on prices of ferro-chrome.
(4)The plans to increase the facilities for production of ferro-chrome at Samancor Chrome are to reform and enlarge the capacity of M-3 electric furnace installed at the Middleburg plant and to complete the construction of new M-4 electric furnace by June of 2008. These arrangements will enable Samancor to have the capacity to additionally produce 140,00 tons per annum of plasma-type charge chrome. We produced 1,160,000 tons of charge chrome and sold 1,050,000 tons of this ferro-alloy in the financial year of 2007 ended on the 30th June of 2007. A differential between 1,160,000 tons and 1,050,000 tons was the quantity of charge chrome used as raw material to produce IC-3 ( medium carbon ferro-chrome ) and low carbon ferro-chrome.
(5)Kermas had once objected to the regulations for exports of South African chrome ore enforced by the Government of South Africa but, by taking into consideration of the comprehensive interest in South Africa, at present does not object to the regulations, because South African Government has attached an importance to the industry of ferro-chrome and underpinned this industry. When the exports of chrome ore from South Africa are regulated, this treatment connects with an evocation of the demand for ferro-chrome and meets with an interest held by South African Government, which aims to add more value to material.
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