South African logistics woes support chromite price

Chromite prices rose further in the two weeks to Tuesday May 31 on support from cost pressures and logistical issues in South Africa

Fastmarkets’ fortnightly assessment of the price of chromite, chemical, 46% Cr2O3 min, wet bulk, fob South Africa edged up to $295-310 per tonne on Tuesday, from $285-310 previously, while its assessment of chromite, foundry, 46% Cr2O3 min, wet bulk, fob South Africa prices climbed to $330-360 per tonne, from $300-330 two weeks earlier.

Fastmarkets’ fortnightly assessment of the price of chromite, foundry, 46% Cr2O3 min, dried and bagged, fob South Africa held firm at $400-430 per tonne on May 31.

Price support has largely come from continuing transport difficulties in South Africa, exacerbated by further flooding in recent days and delays at ports, with sources saying that demurrage costs may be up to $40,000 per day.

A 20,000-tonne chrome ore cargo sitting in port at a demurrage charge of $40,000 a day for even five days would mean $200,000 in additional costs, or $10 per tonne, a chrome alloy trader said.

Rising fuel costs have also continued to contribute to higher chromite prices, sources told Fastmarkets.

“In South Africa, we’re expecting anywhere up to a 4 rand [$0.26 per litre] increase in diesel prices,” a trader on the metallurgical side said on Tuesday. “If that’s the case, we’re going to see a minimum of 100 rand increase just in transport. That’s $6-7 per tonne [in extra costs].”

Since then, the South African National Treasury and Department of Mineral Resources and Energy (DMRE) have said in a joint statement that the government is taking new steps to curtail soaring fuel prices.

This includes extending the 1.5-rand-per-litre cut in the general fuel levy, first announced in March, from 1 June until 6 July. The levy will be adjusted downward to 75 South African cents per litre from 7 July until 2 August.

From 1 June 2022, the DMRE will also remove the demand side management levy of 10 South African cents per litre that has been applied to inland 95 grade unleaded petrol.

However, in a separate statement, Minister of Mineral Resources and Energy Gwede Mantashe confirmed that even with the new measures, petrol prices for June will rise by up to 243 South African cents per litre and diesel prices will rise by up to 110 South African cents per litre.

At the same time, major backlogs at key ports, including Durban – which was significantly affected by the recent flooding – and Richards Bay, have driven exporters of both metallurgical and non-metallurgical grade chrome ore to resort to transporting material to other ports to make sure it reaches its destination.

“We’re looking at alternative supply chain options. We’re looking at going through [Mozambique capital] Maputo, even with the extra logistics costs,” the trader in South Africa said.

“Material is being trucked from Johannesburg and Rustenburg to Maputo at huge cost to avoid Durban and Richards Bay delays,” a trader with a presence in both metallurgical and non-metallurgical markets agreed.

As a result, Maputo has begun to run out of space and may not be a viable alternative for much longer, the trader added.

“I’m afraid that we might start seeing the same delays there that they were experiencing in Richards Bay for the last two years,” he said. “We’ll see if they can handle the extra volume there. Anything that is moving in bulk will see the same delays and issues. On container shipments, it’s taking about eight to ten weeks from mine or plant to sailing on just about anything that needs to be exported. The logistical issues in South Africa are worse than ever.”

Fastmarkets’ inferred price assessment of chromite, foundry, 45.8% Cr2O3 min, wet bulk, fob South Africa climbed to $320-350 per tonne, from $290-320, and its inferred assessment of chromite, refractory grade, 46% Cr2O3 min, wet bulk, fob South Africa stood at $330-360 per tonne, up from $300-330.

In the metallurgical market, Fastmarkets’ calculation of its chrome ore South Africa UG2/MG concentrates index, cif China edged down slightly on May 31, to $294 per tonne, from $296 previously, but there have been suggestions that the issues in South Africa could lend renewed support here too.

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