Trade, industry & competition minister Parks Tau has followed through on a June cabinet decision to regulate exports of chrome as part of measures designed to clamp down on illicit trade in the critical mineral.
On Friday Tau kick-started the process of placing chrome ore under export control by the International Trade Administration Commission of SA (Itac), stating in a government notice that the move is part of government wide measures “designed to improve the long-term viability and competitiveness of the chrome value chain”.
“Cabinet’s decision to place chrome ore under export control recognises the strategic importance of the chrome value chain in supporting SA’s industrialisation goals and mineral beneficiation strategy, [including] value addition of raw minerals close to source of mining extraction,” reads the notice directing Itac to establish a permit processing system for chrome ore.
“Based on this system, prior to the exportation of any chrome ore exporters will be required to apply to the commission for an export permit. Assuming that a permit application is properly completed, and that any other requirements have been duly met, the commission will issue an applicant with an export permit.
Improved strategic management
“This permitting process, together with the other interventions decided on by cabinet, will allow for a more strategic management of this critical mineral resource.”
Business Day reported last month that the industry has been pushing for the government to regulate chrome exports in light of estimates that illegally mined chrome now accounts for 10% of all chrome mined in the country each year, amounting to about 2.7-million tonnes per annum.
The Sunday Times reported that the government is mulling a 25% tax on exports of raw chrome to protect the local ferrochrome industry, which is battling surging electricity costs.
SA has 70%-80% of the world’s chrome ore reserves. However, its declining competitive position in the global ferrochrome market has led to a reduction in production capacity.
Apart from the thriving black market, the country’s high energy costs have made it near impossible for chrome producers to beneficiate the raw chrome to produce the more valuable ferrochrome — an ingredient in stainless steel production.
The notice issued by Tau inviting members of the public to comment by the end of this month on the mooted regulation of chrome exports reminds the public that the SA chrome value chain is a large contributor to the country’s mining and industrial base.
It said the sector, which employs thousands of people, has experienced a steady decline in recent years, which requires a co-ordinated effort to turn around. “This decline has been attributed to a combination of binding constraints, including rising electricity costs, global market pressure and the unregulated export of raw chrome ore,” it said.
“In response, cabinet has endorsed a co-ordinated intervention by the government and industry stakeholders to stabilise and revitalise the chrome value chain.”
Scores of smelters in SA have idled, hurting the beneficiation of chrome ore to ferrochrome as leading domestic producers Glencore Alloys and Samancor struggle to keep up with high energy costs. China has filled the vacuum, emerging as the leading ferrochrome player in the world.
The cost of electricity has risen more than 800% in SA since 2007. According to a study by Boston Consulting Group, high energy costs are damaging SA’s mining industry as a whole, which accounts for about 8% of GDP. The study found that SA’s energy costs are the fourth highest among comparable mining jurisdictions.
China’s electricity is more than 50% cheaper than in SA and the Asian economic powerhouse started constructing huge ferrochrome plants in the country and Mongolia from about 2012.
Electricity & energy minister Kgosientsho Ramokgopa has met with the chrome industry to find sustainable solutions, as per the cabinet’s June directive.
Glencore and Samancor have idled most of their beneficiation operations, with none of Glencore's 22 furnaces running — the first time this has happened in more than two decades.
For energy-intensive sectors such as ferroalloys, mining, steel and chemicals, electricity costs are the largest component of production expenses, often accounting for 40%-60% of total costs.
Ferroalloys Producers Association chair Nellis Bester told Business Day last week that the sector needs a competitive tariff structure, stressing the critical importance of electricity pricing for the survival of smelters that produce chromium, silicon and manganese alloys.
“These smelters feed SA’s steel and stainless steel industries, which in turn support local manufacturing. The interdependency between these alloys and steel production is crucial and must be maintained.”
SA is said to have shed at least 300,000 jobs across the value chain due to the closure of 14 energy-intensive smelters across the country.
With Lindiwe Tsobo
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