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Nkomati targets SA chromite ore sales
Allan Seccombe
Posted: Wed, 19 Jul 2006

[miningmx.com] -- NKOMATI Nickel will be cautious with the amount of chromite ore it sells to offshore buyers, with more than half of its expected 60,000 tonnes/month output sold onto the local market, executive of corporate development Pieter Rorich said on Wednesday.

Xstrata on Tuesday sharply criticised chromite producers selling their product offshore, particularly to China, when ferrochrome production capacity in South Africa was running below optimal levels. South Africa is the world’s largest ferrochrome producer, accounting for 42% of global supply. Ferrochrome is used to make stainless steel.

The Nkomati nickel mine has measured and indicated resources of 7.3 million tonnes of oxidised chromitite lying over its nickel resources that will be mined in open pit.

Joint owners, the JSE-listed African Rainbow Minerals (ARM) and London-listed LionOre, told the market earlier in July that they had approved a 60,000 tonne chrome ore mining and processing venture.
finalising agreements on exports
“We plan to sell the ore and a large portion, little more than half, will be sold domestically,” Rorich told Miningmx. “We are finalising agreements on export sales as we speak and I don’t want to disclose that.”

Xstrata’s MD of chrome, Deon Dreyer, said large amounts of extra chromite ore going to China could further dent demand for South African ferrochrome in the world’s largest stainless steel maker.

South Africa exports of chromite ore have grown exponentially over the past five years to nearly 350,000 tonnes last year. Dreyer singled out Kermas as one of the biggest exporters of ore and said it planned to drive its exports up to a million tonnes/year. Kermas, which recently bought Samancor from BHP Billiton, was unavailable for comment.

However, Kermas chairman Danko Konchar told Bloomberg the company will ship 300,000 tonnes of chromite ore to China this year. It might restart two idled furnaces in South Africa where earlier this year just six of its 15 furnaces were running.

South African ferrochrome exports to China by the end of 2004 fell to nearly zero, according to presentation he gave to the South African Department of Minerals and Energy to persuade it to do something about curbing exports of chrome ore. One of the measures Dreyer suggested was the imposition of an export tariff to cancel out the favourable import tariff in China on chromite ore.

Nkomati was well aware of the need to husband the amount of chromite ore going onto the market.

“It’s a balancing factor. We need be careful not to oversupply ore into the market. We won’t supply significant tonnages or oversupply the market,” Rorich said, adding the tonnage it would supply could fluctuate depending on the stripping plan at the opencast mine.

The ore is fairly high in phosphorus, which is not favoured by ferrochrome and stainless steel producers because it affects the quality of stainless steel.

The Nkomati chromite ore has to be blended with other ore to dilute the phosphorus content. It is likely that Assmang’s Machadodorp ferrochrome plant will be a recipient of some of the ore, but Rorich declined to say what quantity.

ARM holds 50% of Assmang.

Dreyer argued that South African ferrochrome plants operated at 77% capacity last year against 89% in 2004. The reasons were the strength of the rand and a more than doubling of Chinese ferrochrome output to 700,000 tonnes last year.
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“I believe it should run higher than that otherwise the industry will keep contracting,” Dreyer said. He said 90% would be an optimum level of capacity.

China should not produce ferrochrome because of power constraints and a lack of domestically produced chromite ore. As the Chinese economy continues to grow and manufacturing increases, the government there might divert electricity away from the ferrochrome sector to other industries, he said.

Xstrata hopes Chinese ferrochrome output will peak at a million tonnes per annum, leaving global ferrochrome producers to fill a forecast demand gap of 1.5 million tonnes by 2010.