Ferrochrome production in SA remains flat during H1 2022
Global stainless-steel production decreased by 2.7%1 for the six months ended 30 June 2022 (“H1 2022”) compared to the six months ended 30 June 2021 (“H1 2021”), as Chinese melt rates slowed by 4.3%. This was partially offset by an increase in the Indonesian production.
Increased power availability in China supported ferrochrome production growth of 20% year-on-year (“YoY”) during H1 2022 to 3.45mt. Ferrochrome production in South Africa remained flat during H1 2022 YoY at 1.93mt. Increased supply put pressure on prices at the end of H1 2022.
China imports of South African chrome ore decreased by 1.6% year-to-date (“YTD”) May 2022 to 5.2mt as logistical constraints persisted in South Africa. Due to the high chrome ore consumption in China, port stocks decreased 40% during H1 2022. This has resulted in 48% higher pricing for chrome ore.
The average European benchmark ferrochrome price was US cents 1984 per pound in H1 2022, which represents an increase of 44.5% from the H1 2021 average price.
OUTLOOK
Just as the COVID-19 risk was abating, other global and local risks have emerged. Locally, floods have wreaked havoc, especially in the KwaZulu-Natal region, disrupting logistics channels and sadly resulting in the loss of life.
Transnet’s challenges, which have also impacted the ferrochrome industry, have included infrastructure theft and damage, lack of spares and insufficient rolling stock. In general, supply chain constraints remain a concern.
Eskom’s situation deteriorated further over the period following the utility’s industrial strike action leading to power cuts escalating to stage 6. Internationally, the Russia/Ukraine conflict has not only resulted in the unfortunate loss of life, but led to global uncertainty, supply shortages, inflationary pressures and fueled recession concerns.
These events have impacted the ferrochrome industry in one way or another and are likely to affect production inputs and chrome demand/supply dynamics going into the second half of 2022 (“H2 2022”).
As a result, the ferrochrome industry expect a tougher H2 2022. it remain cautious in its approach to the remaining six months of the year and will continue to focus on efficient operations, cash preservation, cost control and efficient capital allocation.
