Picture: SIMPHIWE NKWALI
Picture: SIMPHIWE NKWALI

Low chrome prices have forced the closure of small mining companies and reduced output from others, opening the way for consolidation in the industry, says Tharisa COO Michelle Taylor.

Tharisa is a chrome and platinum group metals (PGM) miner, with a mine near Brits in SA’s North West province, and two prospects in Zimbabwe, one of which is chrome and which the company plans to bring into production provided it makes sense in a low price environment, Taylor said.

Speaking at Tharisa’s annual results presentation, she said the low chrome prices during the year to end-September was offset by higher PGM prices. Chrome prices declined by 12.5% to $162/tonnes, but a doubling of the rhodium price and a 50% jump in palladium prices showed the benefits of mixed production from the mine.

“We have started to see a change in chrome production. Small plants have closed down and we see that production coming offline. Plants of small to medium size, we’ve seen them curtailing production and going on a longer break over Christmas and New Year,” Taylor said.

“I think what we’d expect to see is about consolidation play across the chrome industry. The bottom line, prices where we see them now are not sustainable and cannot possibly benefit a chrome-only producer. The benefit for Tharisa is the co-product nature of our business,” she said.

The chrome market was described as a “very difficult trading environment” despite global stainless steel output rising 8% higher at 28.6-million tonnes.

Chinese ferrochrome production was 600,000 tonnes higher at 4.4-million tonnes by the end of September. Chrome ore imports in the year to end-September reached 11.4-million tonnes compared to 11-million tonnes the year before.

“Like many bulk commodities, chrome has also endured price pressure caused by negative market sentiment, destocking and other macro factors like the trade war, which should not be underestimated,” said Greg Taurog, Tharisa’s marketing and sales director.

“Current prices are not sustainable given the cost curve of many chrome producers which will, in part, help spur a recovery of prices in 2020,” he said.

Chrome production fell by 11% to 1.29-million tonnes, of which 312,000 tonnes was speciality grade chrome, which fetches a $10 to $20 a tonne premium over the chrome concentrate feeding ferrochrome plants. Chrome is used to make stainless steel.

One of the major challenges for South African chrome producers, the largest supplier of the world’s chrome, is the lack of rail transport to move greater quantities at lower cost to the ports. Companies using trucks to move concentrate to the coast.

seccombea@bdfm.co.za