South Africa moves to adjusted level 4 lockdown; participants see little impact to ore, cobalt markets

South Africa will move to an adjusted alert level 4 lockdown for 14 days from Monday June 28, President Cyril Ramaphosa said in an address to the nation on Sunday June 27.

The move was in response to a massive resurgence of infections and continual mutation of the Covid-19 virus into new variants, according to Ramaphosa.

“The Africa Centres for Disease Control and Prevention reports that a third wave of the disease is underway on the continent. To date, African Union Member States have reported over 5.2 million cases and over 138,000 deaths from Covid-19,” he said.

A list of lockdown measures will be in place across the country from June 28 to July 11, including a ban on all gatherings whether indoors or outdoors and a curfew from 9pm to 4am.

South Africa is the world’s largest producer for chrome and manganese ore, both markets were boosted by concerns over supply disruptions when the country ordered a 21-day lockdown back in March 2020.

But the latest announcement of the African nation’s lockdown has sparked little immediate reaction from participants in the chrome and manganese ore markets.

“Measures [under adjusted alert level 4] have guided no direct restrictions on mining operations and inland transport, which should keep both industries largely unaffected,” a chrome and manganese ore trader source said. “But the uncertainty remains should the number of infections escalate.”

Fastmarkets’ manganese ore index, 37% Mn, cif Tianjin, was calculated at $4.71 per dry metric tonne unit on June 25, down by 1 cent from $4.72 per dmtu a week earlier.

Fastmarkets’ chrome ore South Africa UG2 concentrates index, basis 42%, cif China, was calculated at $158 per tonne on June 22, unchanged from the previous week.

Additionally, participants in China, a major importer of chrome and manganese ore, pointed out the abundant stocks at Chinese ports should offset any possible supply shortfall.

Fastmarkets’ weekly assessment of chrome ore inventories at the main ports of Tianjin, Qinzhou, Lianyungang and Shanghai was at 3.40-3.52 million tonnes on June 22, down by 4.7% from 3.54-3.71 million tonnes on June 15.

Fastmarkets assessed manganese ore inventories at the main Chinese ports of Tianjin and Qinzhou at 5.45-5.74 million tonnes on June 21, down by 0.1% from 5.59-5.61 million tonnes a week earlier.

These port inventories will be updated at 2pm London time on Monday.

Beyond the chrome and manganese ore markets, sources in the cobalt market also downplayed any immediate impact to the supply of the blue metal, though logistics of cobalt hydroxide have been constantly disrupted since late last year.

Around 70% of cobalt in the world is mined in the Democratic Republic of Congo (DRC) before it is transported to and shipped out of South Africa.

The logistics bottleneck affects both inland and ocean transportation routes, according to market participants.

“There were several lockdowns in South Africa in the past few months, but cargo transportation was not suspended at borders,” a supplier source said.

“That said, a shortage of trucks and delays at borders due to quarantine measures have added to the time spent on inland transportation,” he added.

In addition, the same source also noted the delays at transshipment ports, typically Singapore, as well as inflow queues of vessels at major Chinese ports, both added to logistics delays.

“There were around at least 7,000-8,000 tonnes (cobalt metal content) of cobalt hydroxide shipped out of South Africa in March-April, but there was only about 5,000-6,000 tonnes of units cleared into China in May,” the supplier source said. “It was because some of the cargoes were still out at sea due to delays for various reasons.”

China imported 23,499 tonnes (actual tonnages) of cobalt hydroxide in May, down by 33.8% month on month, according to China Customs data. This is roughly equivalent to 5,000 tonnes of cobalt metal assuming both metal content and moisture is 30%.

Fastmarkets’ cobalt hydroxide payable indicator, min 30% Co, cif China, was 88-89% of Fastmarkets’ standard-grade cobalt price (low-end) on June 25, unchanged since June 9.