Signs of movement in shipments of chrome ore and manganese are starting to emerge, but the ferrochrome market remains depressed and difficult to predict. So says David Ellwood, managing director of South African commodity trader, Metmar.
South Africa is exposed to the global steel industry as it contains 72% of the world's chrome ore resources and 80% of manganese ore resources, according to figures from the country's Chamber of Mines.
Mr Ellwood said that the steel and stainless steel industries around the world remain depressed, but there are signs of the Chinese buying in commodities markets after a lack of buying activity since the middle of last year.
China, with huge foreign exchange reserves and substantial exposure already to the dollar, appeared to be investing in commodities when prices dipped and withdrawing as prices started to rise. This was evident from the recent rise in the Baltic dry index, indicating shipments were increasing.
SA's ferrochrome producers have shut down all or most of their production capacity, at least until next month, citing producer stockpiles that could be as high as a year's supply. But Mr Ellwood said it was impossible to know exactly what the position was on stockpiles as it suited ferrochrome producers to claim their stocks were low and ferrochrome buyers to claim that their stocks were high.
Producers responded rapidly to a fall in prices by cutting back on production. If Chinese buying resumes strongly, in line with growth in its economy, prices could rise sharply.
Despite the plunge in the manganese spot price to about $6.20 per 1% of a manganese unit from a recent peak of $16/unit, Metmar's 10%-held Kalahari Resources is continuing to fast-track the building of a manganese mine in Northern Cape.
Source: Allafrica.com
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