Lack Of Power Holding Back SA Ferrochrome Industry

There is significant global ferrochrome production capcity and, even with the recent surge in demand from China, it will take some time 
before the industry can fully draw on this capacity, stated MSA Geoservices consultant Richard Wadley earlier this month.

“That, of course, is always 
assuming that the industry will have sufficient electricity supply for those energy-intensive plants,” said Wadley at a Ferrous Metals conference, in Johannesburg.

The fact that South Africa is at least three years away from significant new power-generation capacity would definitely impose a hindrance on the industry’s 
recovery to its former level.

Electricity is also becoming more expensive and power tariffs alone could constitute a third of the production costs of ferrous metals in the near future.

Nonetheless, Wadley pointed out that the ferrous metals industry was well aware of the impact of rising electricity costs. “There are concerted efforts being made to push technology towards greater 
energy efficiency,” he said.

Further, he noted that the ferrous metals industry followed the decline in steel demand and steel prices, with industry prices 
effectively being halved in the past year. “However, there has been some recovery and most prices are back to the levels they were at in 2006/07.

“Unfortunately, costs have risen dramatically and, although the prices are up again, profitability is much lower than it was in 2006/7.

“Alternatively, the industry could consider the export of raw materials; however, South Africa is still hindered by some serious logistical constraints,” said Wadley.

Nonetheless, he noted that
all was not lost for the South
African ferrous metals 
industry, seeing that many of the other industries and producers were experiencing similar problems.

Electricity costs were rising globally and infrastructure in most developing countries was not up to scratch. “By and large, our competitors are experiencing many or all of the problems and challenges that we are encountering.

“It is not entirely doom and gloom – we have a vibrant, highly sophisticated and deeply experienced fraternity that operates within the South African ferrous metals industry.

“Industry has shown resilience and an innovative ability to move forward, taking into account the different constraints. This is certainly not the first time that the ferrous metals industry has 
experienced a downturn.

“By and large, we are emerging from the trough of the last eight months in somewhat better shape than one might have expected.”

Wadley said that the South African ferrous metals industry could only hope that the recovery fuelled by Chinese demand was solid and sustainable, and that it wold underpin long-term recovery of the industry.

Source: Mining Weekly