SOUTH Africa is to apply an export tax on chrome ore, a development the government said was part of a strategy to support the country’s domestic ferrochrome industry.
“The interventions include the proposed introduction of the export tax on chrome ore, the usage of energy efficiency technologies on smelters, and the adoption of cogeneration and self-generation technologies,” said Minister in the Presidency Jackson Mthembu, following a Cabinet meeting today.
He did not disclose details of the export tax, and the mines ministry did not immediately provide details about the proposed tax when asked by Reuters.
Chrome ore is a key ingredient in stainless steel, an essential material for the automobile industry. South Africa last year supplied 12.5 million tons of chrome ore to China – 83% of China’s total chrome imports, said Reuters.
Africa’s ferroalloys industry faced “destruction” owing to a sixfold increase in the electricity tariff provided by the country’s power utility, Eskom, said BusinessLive.
“We are a dying industry,” Nellis Bester, chair of South Africa’s Ferro Alloys Producers Association (Fapa), told the publication.
In the past three years, 40% of South Africa’s ferroalloy capacity has been idled because it is no longer competitive, primarily due to a more than sixfold increase in electricity tariffs for heavy users such as smelters, mines and large industry, said BusinessLive. Electricity accounts for up to half of the cost of running a furnace.
Commenting in an interim review in September, Merafe Resources said “… unsustainably high electricity pricing” was a major feature of the six months ended June 30. Total South African ferrochrome production had halved in the second quarter.
“Prices in South Africa have escalated 500% over 10 years. Under these types of increases, we will struggle,” said Japie Fullard, head of ferrochrome operations for Glencore in South Africa last month. “I can’t see how we can operate our smelters in that price environment,” said Fullard in a Miningmx article.
Merafe is in joint venture with Glencore.