South Africa, the world’s biggest chrome producer and supplier, plans to levy an export tax on chrome ore to support the domestic ferrochrome industry. Its implementation timeframe and tariff rate, however, was not declared in the government announcement dated Oct 22, 2020. The action comes in the wake of the National Union of Mineworkers in South Africa calling for urgent restrictions on chrome exports, especially to China in September.
Stainless steelmakers who majorly consume Chrome ore for production are likely to hit due to this decision. China, one of the major importers of South African Chrome ore could have to look for new suppliers in the coming days. It is said that China was stockpiling chrome, mainly sourced from South Africa, to dictate future market prices.
Major miners and processors in South Africa, including Glencore, Merafe Resources, Samancor Chrome, Tharisa, and Jubilee Metals, are expected to lower their exports should the tax be implemented.
South Africa exported 12.5mn mt of Chrome ore to China, about 83pc of total Chinese chrome imports in 2019. Prices of stainless steel, a key element for the automobile industry could be affected by this decision, said an industry source.
Global Chrome ore prices to rise
If Chrome ore prices rise in the coming days on short supply, stainless steel producers could have to deal with higher input costs for grade the 400 series stainless steel, with up to 30pc Chrome. Other stainless grades, such as the 304 and 316 series could also be impacted, but by a lesser margin considering the chrome content of up to 18pc, stated a Davis Index source.
Could India follow suit?
Political tensions between India and China are already boiling down to sour trade relations between the two countries. Thus, there have also been talks about a ban on exports of Chrome ore from India to China. Indian ministry had warned that the country is likely to run out of the costly element for steel manufacturing if it failed to ban exports. Indian Chrome ore reserve is estimated at 50mn mt, which have now depleted to around 38mn mt.
Earlier, the government tried to restrict exports by levying tariffs. However, the government is now mulling a total ban on exports for the first time.
The impact of the South African export tax on India is likely to be limited since the latter mainly opts for Chrome ore from Malaysia, the Middle East, and Europe.