No power for chrome-smelting

Windhoek – Lack of guaranteed and sufficient electricity supplies is limiting chrome mining companies in South Africa and Zimbabwe. The two countries sit on the world-class chrome reserves but lack smelting capacity. South Africa and Zimbabwe have about 85 percent of the world’s chrome reserves and demand for the mineral is fuelled by China’s huge industrial growth. Despite pressure on chrome producers to add value before exporting minerals, there have been slow inroads in building smelting capacity due to electricity shortages. The entire Southern Africa region is grappling with power shortages and mining companies say that without guaranteed electricity supplies, investment in chrome smelting facilities is a non-starter. In May this year, Zimbabwe reaffirmed its ban on exports of unprocessed lumpy chrome, and miners are being forced to stockpile what they extract. Others are reportedly smuggling it, mainly to Chinese buyers via South Africa and Mozambique. Small-scale miners are said to be largely responsible for smuggling because they cannot afford to smelt. Inadequate coal supplies are also said to be undermining Zimbabwe’s smelting capacity. A senior official with Sinosteel Corp-owned Zimasco, the country’s largest ferrochrome producer, a week ago said: “We have been importing coking coal for our furnaces from Botswana primarily because of two reasons; it’s cheaper and always available.” Zimbabwe’s two other major ferrochrome producers are Zim Alloys Chrome and Maranatha Ferrochrome. Speculation is rife that the South African government will follow Zimbabwe’s lead in restricting unprocessed chrome sales through an export tax. Export restrictions in the absence of smelting capacity will likely result in scaled-down production by miners. Exports of unprocessed chrome benefit China, which does not have chrome reserves but aims to be the world’s largest ferrochrome producer by 2015. China does not have any ore reserves but is positioning itself as a low-cost ferrochrome producer through importing cheap ore. The Southern Times understands that a South African consultancy is conducting a study on the impact of an export levy on raw chrome exports. Despite increasing calls for miners to beneficiate the mineral locally, companies say this is not possible without guaranteed electricity. “There is shortage of electricity to feed into smelters to beneficiate locally. “If there is no power available how does one beneficiate raw chrome,” Metmar Ltd CEO David Ellwood told this paper. “China has smelting capacity but they don’t have chrome ore reserves; that’s their advantage,” Ellwood added. Metmar’s Zimbabwe unit, Zim Alloys Chrome, last month said it had so far stockpiled about 34 000 tonnes of ore due to insufficient smelting capacity. “They are trying to encourage investment in smelting but it’s a major challenge and the same situation applies in South Africa as well as Zimbabwe,” Ellwood said. Ellwood said that an export levy will reduce the competitiveness of producers. He said Southern African chrome miners were competing with India, Turkey and Albania for the Chinese market. “An export levy will make chrome producers uncompetitive and chrome will be too expensive. “Chinese buyers have a lot of choices, Turkey for example, they will buy from elsewhere,” Ellwood warned. About 90 percent of chromite mined worldwide is converted to ferrochrome, which is used in the production of stainless steel. There is no substitute for chrome ore, a key industrial mineral for steelmakers. Chrome smelting consumes huge amounts of electricity, making it a costly exercise for countries with high energy tariffs. Mining experts say half of the costs of ferrochrome production go to electricity. “No power means there will be no new ferrochrome smelters or manganese smelters built. “As those investments (into power generation) are made, there will be allocation of tonnages and we will see additional significant investment into the beneficiation of raw materials,” Ellwood said.

August 2011
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