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The South African chrome and ferro-chrome landscape is on the cusp of monumental changes. A fine tug of war is going on, a lot of it behind the scenes, between ferro-chrome producers and chrome ore by-product producers, while caught in the middle is the South African government.
Anglo Platinum is actively discussing setting up a low-cost, highly competitive 500,000-tpy ferro-chrome smelter, to be fed by its own captive UG2 ore. It says that ferro-chrome producers, who are pushing for a controversial export tax on ore, are forcing its hand.
Ferro-chrome producers have welcomed Anglo Platinum’s discussions, saying that this would achieve what they were aiming for: less outflow of raw ore, more beneficiation inside South African borders.
The fact that Anglo Platinum is discussing the prospect of a smelter would arguably strengthen the case with government for the export tax. South Africa’s plan for economic growth is rooted in more downstream production, including beneficiation. Government’s dilemma
Also part of the economic growth plan is to address the huge unemployment rate. And here lies the conflict.
The platinum industry, the biggest employer in South Africa’s mining sector, is gushing blood. Government is meeting with platinum producers in a bid to save the industry from complete derailment.
If all, or even just a fair number of platinum companies, were to collapse, it would cause employment devastation.
Certainly, one aspect for government to consider would be that UG2 is right now one lifeline the platinum industry has. An export tax could strangle and outright flatten the industry.
At the same time, ferro-chrome producers are also meeting with government to lobby for their position. Some of the producers believe they have the government’s ear, and some even say the tax is a done deal.
For the platinum producers, the tax is far from certain. However, the window is fast closing, as government is set to make a decision on the tax in the next few weeks, if it is to be passed by February next year.
Deal breaker
Whatever the outcome of the tax, if Anglo Platinum were to decide on building a smelter, it must be able to switch it on. Electricity supply is very tight.
Ferro-chrome producers understand this all too well, having been in buy-back programmes with Eskom the whole of this year, heavily affecting their output numbers across the board. Anglo Platinum has admitted that power is a potential barrier to entry.
It becomes clear that the battle between ferro-chrome and UG2 producers is but a sideshow. The real deal breaker would be the government’s decisions in a very fine balancing act between employment, developing skills and downstream products, and making these possible within a power constrained environment.
These decisions will make or break the future of a nation and its ability to keep industries floating.