SA tax on ferrochrome set to constrain market
13 April 2016
Posted by: Author: Tawanda Karombo
Author: Tawanda Karombo (IOL)
An export quota and tax imposed by South Africa on ferrochrome would constrain the market for the key steel manufacturing ingredient, experts said, arguing that other producers, such as Zimbabwe, had moved to lift levies and bans on exports.
Research analysts at Persistence Market Research said in a new report that the global ferrochromium market could get hampered because of export tax and fixed quotas imposed by South Africa on chrome ore.
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"South Africa (has) a significant market share in the global ferrochromium market, but there are concerns of power supply and higher production costs, which would lead to the closure of small competitors and is estimated to slow down the global ferrochromium market,” the report said.
South Africa is one of the major producers of the mineral in Africa and supplies China. The country imposed the quota and tax on concerns that it was losing the "ferrochromium market".
China and India were among the leading consumer markets for chrome and ferrochrome as they had vibrant steel industries owing to the construction boom happening in the two Asian countries. As a result, the two countries were seen as "significant in the consumption of ferrochrome”, as they had ramped up "capacity to import chrome ore from countries such as South Africa, Turkey, Zimbabwe” and others.
Zimbabwe lifted its ban on chrome ore exports and established Apple Bridge Investment (ABI), a special purpose vehicle company to facilitate exports.
But a power crisis in both countries has tipped the global ferrochrome market into deficit with several smelters facing financial instability as a result of the higher production costs.
Merafe Resources recently flagged "weak commodity prices and slowing economic growth in China”, as major threats to the ferrochrome industry. Fellow producers who now view South Africa with scepticism accuse it of selling low-grade chrome at low prices to push up its market.
"We have taken a decision to find niche markets in Indonesia, South Africa and China to place high-value chrome ore into those markets. (South Africa) is selling at prices that we cannot match,” Masimba Chandavengerwa, an executive with ABI said.
This article first appeared on iol.co.za.