ASHLEY NYIKO MABASA: Decisive, strategic intervention needed to save SA’s ferrochrome industry

SA’s ferrochrome industry, once a cornerstone of its industrial ambition and a significant player on the global stage, is in a state of profound collapse.

The numbers are stark and reveal a precipitous decline: 34 of the country's 59 chrome furnaces have fallen silent over the past decade. Concurrently, SA’s share of global ferrochrome production has plummeted, dropping from a commanding 39% in 2009 to a mere 26% by 2019.

This contraction in domestic processing capacity is mirrored by an explosive growth in the export of raw chrome ore. The overwhelming destination for this unprocessed material is China, which now sources over 80% of its chrome ore imports from SA, a volume that reached a historic high in 2024. 

The pattern is distressingly clear: what was once a vertically integrated industry, capturing value through smelting and alloy production, is rapidly reverting to a simple extractive model, exporting its natural endowment without significant beneficiation.

SA, despite holding about 70% of the world’s known chrome reserves, is thus in effect exporting the foundations of its own potential industrial base. Its smelters stand idle while unprocessed ore feeds the furnaces of competitors.

This strategic reversal is not merely an economic statistic; it represents vanishing jobs, shrinking contributions to GDP and the erosion of critical domestic industrial capacity.

Ferrochrome is indispensable for the production of stainless steel, an alloy vital across numerous modern industries. Producing it is inherently energy-intensive, requiring about 4MWh of electricity per tonne. This fact lies at the heart of the SA crisis.

Since 2005, domestic electricity tariffs have surged by an astonishing 947%, with yet another substantial increase of 12.7% anticipated for 2025. Under such crippling cost pressures smelting operations become fundamentally uneconomical.

Major players are succumbing.

Merafe Resources, through its joint venture with Glencore, recently mothballed two significant smelters, Boshoek and Wonderkop, citing a prohibitive 700% increase in power costs over just eight years.

Their return to operation appears highly improbable in the current environment. The broader industry narrative is one of being systematically undercut and outpaced by Chinese counterparts that benefit from lower input costs and extensive state-backed infrastructure and subsidies.

China’s ascendancy in this value chain is strategic and deliberate. Its stainless steel output now constitutes over 63% of global production. Beijing’s expansion into lower-cost ferrochrome smelting has not only displaced SA producers in global markets but has in effect leveraged SA’s raw material wealth to build its own integrated and highly competitive industrial capacity.

This structural shift carries profound economic consequences for SA. In 2010 the chrome value chain, anchored by beneficiation, contributed a substantial R42bn to the nation’s GDP and generated R36bn in foreign exchange, with value-added products accounting for the vast majority of that sum.

Today, the country is exporting raw ore at scale while paradoxically importing value-added products — including ferrochrome-derived goods — at premium prices.

The social cost is equally severe. The chrome value chain once supported over 200,000 jobs; many have evaporated as beneficiation has declined. Compounding the revenue losses are chronic domestic logistical failures. Rail bottlenecks, inefficient ports and rampant theft severely constrain the ability of even raw ore exporters to fully capitalise on favourable market conditions, as seen during the price rally in late 2023 and early 2024 driven by depleted Chinese stockpiles.

A further corrosive element is the pervasive illegal mining sector. So-called “zama zamas” are estimated to divert up to 10% of annual chrome production into illicit channels. These activities not only distort legitimate markets and feed corruption but actively undermine the viability of compliant operations.

Government is not entirely oblivious to this unfolding disaster. An interdepartmental task team has been formed to explore policy interventions, including export taxes on raw chrome, preferential electricity tariffs for energy-intensive users, and infrastructure investment. Yet the pace of policy implementation remains frustratingly glacial, and investor confidence, already fragile, continues to drain away.

Alternative models exist. Australia, with limited domestic processing, captures rents from its raw material exports primarily through stringent taxation. SA could adopt elements of such a fiscal approach. However, given its historical strengths in smelting, established infrastructure and proximity to key inputs, a strategic retreat to mere raw material extraction would be a preventable error of immense proportion.

Chrome’s contribution to national mining revenue actually increased in 2023, indicating that the resource itself remains valuable and abundant. The problem lies not underground, but in policy. Without a coherent, decisive industrial strategy — one that prioritises beneficiation, provides a competitive energy landscape for intensive users, and effectively combats criminal syndicates — SA risks permanently locking itself into the lowest-value segment of the global chain.

The collapse of the ferrochrome sector is not an inevitable outcome of geology or global competition in itself, but a direct consequence of domestic policy inertia and failure to address fundamental structural constraints, most notably energy supply and cost.

SA still possesses world-class resources, a skilled workforce and technical expertise. However, should it fail to act decisively and strategically now, these valuable assets will simply continue to fuel the industrial growth and prosperity of others, particularly China.

• Mabasa is executive manager in the office of the deputy mineral & petroleum resources minister and co-chairperson of the Brics Youth Council