Key ferro-alloy forecast highlights for the coming months:

• A strong recovery in both bulk and noble alloys is expected in 2021 but the markets are unlikely to return to the levels seen before the outbreak of the Covid-19 pandemic. We have seen a quicker-than-expected recovery across various regions amid the economic fallout of the pandemic, and expect to see a stronger recovery overall next year. China will continue to lead the economic recovery in 2021 due to various economic stimulus measures, while other nations will also enjoy the beneficial effects of government stimulus spending through 2021.

• With lockdowns and pandemic restrictions preventing consumers from spending on travel, experiences and services, consumers are instead increasing their spending on durable goods including cars, appliances and other steel-intensive manufactured goods, in a positive development for steel and ferro-alloy markets. If government stimulus also leads to infrastructure investment in the EU and the United States next year, this would be another positive development for steel and ferro-alloy alloy demand in 2021.

• News that South Africa’s government is considering imposing a chrome ore export tax broke just after the publication of our previous tracker, but has dominated discussion within the chrome markets since then. Above all, Chinese ferro-chrome smelters would be affected, given that they rely heavily on South African chrome ore – around 80% of China’s chrome ore imports during the past year have come from South Africa.

• There remain a number of uncertainties, however, regarding the proposed chrome ore export tax. Not least of these is whether an export tax will in fact be implemented – discussions of such a tax have been aired before only to amount to nothing. Second, there is as yet no indication about the level of any export tax, although most market participants expected that it would be in the range of 30-40%.

• For now, some of South Africa’s leading chrome ore miners and exporters are arguing against the move. Chrome mining and the export of ores has expanded over the past decade, while smelting of ferro-chrome has stagnated. Putting up the greatest opposition to any export tax are the platinum group metals (PGM) miners, which sell UG2 chrome ore as a by-product of their PGM mining, and generally have no downstream smelting capacity. This could be a crucial point, given the higher value of PGM mining to South Africa’s economy when compared with the chrome industry.

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