SA’s ferrochrome producers are calling for government support against their Chinese counterparts in what has emerged as another trade skirmish between the two countries.
The battle to retain leadership of the global ferrochrome market and remain a key supplier to the Chinese stainless steel industry amplifies the struggle of clothing and textile makers against a cheap Chinese goods onslaught.
Ferrochrome producers have called for restrictions on chromite ore exports to China, which is 99%-dependent on the imports — largely from SA — for its ferrochrome production.
But the proposals are not likely to win support from platinum producers, who produce chromite ore as a by-product for export.
The ferrochrome lobby hopes that by increasing the cost and limiting the quantity of chromite ore exported, the price of Chinese ferrochrome would have to rise, making them more competitive.
The proposed quota and export duty on chromite ore would be a tit-for-tat response to China’s imposition of a stiff 40% export duty on metallurgical coke, which is the sole ingredient that South African ferrochrome producers import — largely from China.
The Chinese government is subsidising various raw material imports (including chromium) to foster beneficiation.
Ferrochrome manufacturers have met the government, and yesterday with MPs, to lobby for urgent protectionist measures.
They say that Chinese competition, together with escalating electricity tariffs and the stronger rand, have threatened their international competitiveness.
Most expect to suffer a “significant loss” this year as a result of the plunge in demand due to the global recession.
The seven producers in the lobby group — including Xstrata Alloys, Samancor Chrome and International Ferrometals — represent about 90% of SA’s ferrochrome production and about 44% of global production.
SA has about 65% of the world’s chrome reserves.
Xstrata Alloys MD Deon Dreyer told Parliament’s mineral resources committee the producers had been undermined by the recent surge in Chinese ferrochrome production.
In a document presented to the Department of Mineral Resources and MPs, the manufacturers asked for legislation to curtail unbeneficiated chromite ore exports from SA to international ferrochrome-producing countries. These exports should be restricted to integrated ferrochrome producers only and limited to 30% of the ore-equivalent ferrochrome production capacity.
This would mean that for chromite ore exports to increase there would have to be an increase in investment in beneficiation capacity. In addition, an export duty of 100 a ton of chromite ore should be payable, along the lines of a measure adopted in India.
“The introduction of Chinese ferrochrome production and the consequent surge in traded ore since 2004 has seen integrated (mining and smelting) production declining from 86% in 2004 to 75% in 2008. SA’s market share over the same period has declined from 51% to 44% against China’s growth in market share from 9% to 18%,” the document said.
As a result of the displaced market share to China, South African capacity idled at 28% last year, representing a 2,5bn loss of sales to China.
Source: Business Day
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