The government of South Africa hopes its
miners will ramp up production and bolster the flagging South
African economy following the lowering of the nationwide alert
on Monday June 1, easing restrictions to combat the Covid-19
"Under alert level 3, all deep mining
operations are expected to ramp up to full capacity. This
brings the mining industry to full capacity of production,"
Gwede Mantashe, South Africa’s mineral resources
and energy minister, said in a statement on May 29.
A sharp increase in production would
relieve tightened supply in markets highly exposed to South
the country’s lockdown was first imposed on March
manganese ore index 37% Mn, cif Tianjin was $5.93 per dry
metric tonne unit on May 29, which was 47.9% higher than when
the lockdown was imposed.
And Fastmarkets’ chromite
46% Cr203 min, wet bulk, South Africa assessment has
risen by 10.3% since the lockdown to $205-225 per tonne as of
But some producers will be cautious about
increasing production. A bid to quickly increase production
raises the risk of an outbreak of Covid-19 and the need to halt
"We are being extremely cautious in
ramping up our production to 50% of capacity, to maintain the
health of our people," a chromite producer said.
"While the new rules mean that production
levels can go up in theory, in reality most producers are still
too concerned about the risk to do so," a second chromite
producer said. "We expect there will still be significant
interruptions in production until August - so it may not be
until the fourth quarter that production is back to
"There is an opportunity cost to not
producing that you cannot realize the benefit of higher prices
but there also the risk of ramping up production and the prices
falling again," he added.
The chromite market has been slow to
increase production since the lockdown. The market had been
oversupplied and producers are wary of a return to this.
As a result, some mines may not reopen at
such as Kroondal, despite having the option to do so and
There is also the possibility the South
African government will re-impose stricter lockdown
restrictions if cases of Covid-19 increase.
"There is the strong possibility of
lockdown restrictions increasing after the relaxation of
regulations lead to an increase of infections at the start of
the winter," a third producer said. "Stronger restrictions
could be reapplied across the supply chain."
Other producers were concerned the lifting
of the lockdown was being made before the virus was fully under
"South Africa is not seeing the worst of
the virus yet, it is not under control," a manganese ore
Therefore, export flows out of South
Africa can be expected to remain subdued.
"Constraints on production are likely to
continue and we could well see a second wave of outbreaks later
in the year," a second manganese ore producer said.