European Q2 ferrochrome price revives in much-needed boost for SA chrome producers

Chrome concentrate

THE European benchmark ferrochrome price increased nearly 13% to 114 US cents per pound for the second quarter of 2020, said Merafe Resources. This compares to an average of 101 US cents per pound during the first quarter.

The improvement in prices may reflect a general pick up in industrial activity in China which is emerging from COVID-19 related lockdowns.

Citing a quarterly report by BHP on Tuesday, the Financial Times said industrial activity was improving in China, spurred by supportive credit and fiscal policies. As a result, (carbon) steel production in China was expected to increase slightly this year provided there are no major outbreaks of COVID-19 requiring new lockdowns.

The improvement in pricing for ferrochrome – which is used in the manufacture of stainless steel – provides a welcome break from the slew of negative news in the sector. Merafe, which has a 20.5% share in the Glencore-Merafe Chrome Venture, cut the dividend in March following “underwhelming” numbers for its 2019 financial year.

Two months earlier, it opened a Section 189 restructuring process of its 430,000 tons per year Rustenburg smelter.

Another South African chrome producer, Tharisa, declared force majeure on March 27 on its contracted chrome concentrate sales agreements after shutting down its North West province chrome and platinum group metal (PGM) processing facilities in accordance with the national lockdown.

However, the firm’s 300,000 tons per month Voyager processing facility was continuing, as allowed in terms of government regulations, but Tharisa had suspended work on its Vulcan chrome recovery project.

Commenting on the carbon steel market, BHP said blast furnace utilisation rates in China had increased to almost 79% in April, up from 73% earlier in the year, while demand for reinforcement bars — steel products widely used in construction — was at or above normal levels for the time of year.

If the country does not experience further outbreaks of COVID-19, steel production “may rise slightly” in 2020, said the newspaper citing BHP’s quarterly trading update. BHP’s comments echo those made by arch rival Rio Tinto, whose CEO, Jean-Sébastien Jacques, said last week that China was “restarting” and “demanding” lots of raw materials.