The chromite market had been severely oversupplied, which
had weighed heavily on prices for several months, before South
Africa went into lockdown at midnight on March 26.
Fastmarkets’ price assessment for chromite,
foundry, 46% Cr2O3 min, wet bulk, fob South Africa stood at
$180-210 per tonne on March 24, prior to the lockdown being
implemented. This marked a drop of 64.9% from $545-565 per
tonne on September 11, 2018, when the price first started to
trend downward. But the weakness has been stemmed since March
and the price even rebounded by 12.8% to be assessed at
$210-230 per tonne on June 30.
The markets for chromite, foundry, 46% Cr2O3 min, wet bulk,
fob South Africa and chromite, chemical, 46% Cr2O3 min, wet
bulk, fob South Africa have been through similar trends
throughout the Covid-19 pandemic, triggering indications of
price rebounds after long-term softening. The market has been
through a supply shock and is now adapting, a producer source
The South African government has lifted some of the curbs on
its mining sector since the strictest set of restrictions were
imposed at the end of March. But social distancing regulations
mean that operating underground remains particularly
challenging. "There is a lot of worry around underground mining
and this has helped to strengthen the market," a second
producer source said.
There has been a significant tightening of new supply to the
market since the lockdown and production has been slow to
recover since restrictions were eased. "There is already a big
shortage of material – the situation of production is
very tough, especially for underground production," a European
trader said. "The future is not clear."
Low profitability and restrictions on activity are a
disincentive for producers to restart operations. Some have
opted to either halt production or reappraise the viability of
Staff at the Glencore-Merafe joint venture Kroondal chrome
mine have been told that financial challenges in the market
mean the mine, with a capacity of 1 million tonnes per year,
will not restart after lockdown measures are relaxed. Glencore
is going through a process of evaluating the sustainability of
all of its chrome assets in South Africa in response to weak
prices and high electricity costs.
This indicates that supply will not fully recover to
pre-virus levels while some producers opt out of the market.
Additionally, outbreaks of Covid-19 have hit producers that
have opted to resume activity. Assore, for example, had to halt
operations in May at its Dwarsrivier chrome mine following
cases of the virus there.
Outbreaks of the virus will be a risk for all miners for the
foreseeable future while the government struggles to contain
the virus over the South African winter. "Covid-19 cases will
continue to crop up in mines and there will be spikes in some
areas – we are still at the beginning of the curve
here," a third producer source said.
Outbreaks of the virus will continue to flare up meaning
that Transnet – South Africa’s state
transport operator – will need to halt its road or
port facilities to allow cleaning and testing before services
can be resumed. This process usually takes two days out of
usual operation and can lead to missed sailing slots.
"There are real problems in moving material," a fourth
producer source said. Transportation by rail to ports such as
Port Elizabeth has been repeatedly hit by outbreaks by the
virus, requiring activity to be halted. Durban’s
Bulk Connections Terminal had to cease operations for two days
from June 29, according to documents seen by Fastmarkets.
But continued tighter supply combined with uncertainty will
not necessarily translate into significantly higher prices in
the short to medium term. "The situation has never been as
complicated as it is now – before coronavirus, prices
were very low and all the European distributors had a lot of
material. Now nobody needs chromite because consumers are
cutting down their activity," a distributor said.
The chromite market is highly exposed to South Africa and
production will be tied to the impact of the Covid-19 virus.
But the effect of the virus will also drive the demand side of
"Demand is not great, especially outside China for steel,
refractories and foundry, but 100% of South African underground
production has been knocked out," said the first producer
source, who saw the potential for sharp price rises while
supply tightness bites.
The balance of supply versus demand is likely to be
characterized by low activity. Supply is likely to slowly
recover but to be uncertain, while demand will also be weak as
buyers respond to the chilling effect of the virus on