While South Africa continues to try to manage what is proving to be the most challenging wave of the COVID-19 pandemic, the chrome beneficiation industry is facing some significant challenges and needs key protection through the implementation of an export tax on raw chrome ore.
A recent statement by Save SA Smelters points out that government’s sluggish adoption of a taxation on the export of raw chrome ore is costing the country an estimated R15 billion in taxable income based on the exported ore tonnages from 2020.
Export tax key to unlocking dormant ferrochrome smelting capacity, says lobby group
Various local newspapers and news outlets report that mining representative group ChromeSA and ferrochrome lobby group Save SA Smelters remain at odds about the proposed implementation of a chrome ore export tax. ChromeSA in a statement on July 7 maintained that “destroying another industry” – referring to chrome ore producers – is not a solution to the challenges faced by ferrochrome smelters.
Chromite sand, a by-product of chrome ore mining, is used in the foundry industry and is uniquely effective as a moulding material for making metal castings, an application in which it has been used for centuries
Save SA Smelters on July 8 responded by pointing out that India (through a 100% tax imposed on chrome ore exports) and Indonesia (through a complete ban on nickel ore exports) protected their value-add industries with great success, and question why this should not happen in South Africa.
Cabinet has previously released a statement in which it said it had approved of measures to support the domestic ferrochrome industry, including through a proposed export tax on chrome ore.
Save SA Smelters claims that chrome mining companies are often focused on gains at the expense of thousands of South Africans who have already lost their jobs. The organisation says it represents at least 17 000 people who have lost their jobs owing to the continued closure of smelters across the country.
More concerning is the fact that – according to Save SA Smelters – government’s slow approach to the implementation of this tax is putting an estimated 3 000 jobs at immediate risk and between 8 000 to 9 000 downstream jobs at risk.
This would have a devastating impact on the chrome mining industry, which would have to cater for global demand with a smaller workforce.
Since 2005, there has been a dramatic change in the ratio of alloy produced to ore produced in South Africa. Save SA Smelters says the ratio has fallen from 0.32 tons alloy per ton ore to 0.18 ton alloy per ton ore in 2019.
Between 2005 and 2019, about 95 million tons of the ore produced in South Africa was not processed into ferrochrome. Assuming 10% of chrome ore is used for non-ferrochrome applications and based on a 2.3 ton of ore per 1 ton alloy requirement, this is equivalent to about 37 million tons of “lost” ferrochrome production in South Africa.
All the while, Chinese stainless steel production capacity has grown from 8.6 million tons in 2008 to 30.7 million tons in 2019. This increased demand for ferrochrome fuelled a rise in exported ore from South Africa, especially upper group two as a by-product from platinum group metal producers.
This dramatic growth in Chinese production caught the major ferrochrome producers in South Africa by surprise and they were unable to keep pace with the necessary expansion – in part owing to lengthy environmental-impact-assessment procedures.
Adding to this difficulty was the start of energy constraints in the wake of load-shedding. This helped China’s ferrochrome smelter industry to grow bigger than that of South Africa. Projections indicate that there will be an increase in ferrochrome demand of about 2.5-million tons over the next seven to ten years, of which a critical mass will come from outside of China.
“Any demand outside of China will have to be sourced from the regions with chrome resources – South Africa and to a lesser extent Kazakhstan,” Save SA Smelters highlights. The organisation adds that it is unlikely that ore will ever be processed exclusively in South African facilities, but the intent must always be to process as much as the local resources will allow.
The cornerstone of South Africa’s economy has long been its rich abundance in minerals and its ability to beneficiate these minerals before exporting them to international customers. In 2019, the mining sector contributed approximately R226.2 billion to the country’s GDP.
According to Charmane Russell, spokesperson for the Minerals Council South Africa, the value added by the beneficiation of minerals in South Africa is quite significant.
“About 94% of South Africa’s cement is made locally from locally mined products. 83% of South Africa’s steel is made locally from locally mined iron ore, chrome, manganese, and coking coal,” she says.
“Around 30% of the country’s liquid fuels are produced from locally mined coal, as is 85% of its electricity. Most of our domestic chemicals, fertilisers, waxes, polymers, plastics, are fabricated using locally mined minerals and coal. Finally, 8% of the world’s platinum catalytic converters are produced locally,” adds Russell.
She says the Minerals Council estimates that beneficiation adds around R500 billion in overall commodity sales value. In addition, it estimates that more than 200 000 jobs are created in the downstream beneficiation industries.