According to the U.S. Geological Survey, chromium resources are geographically highly concentrated: 95% of all resources are located in Kazakhstan and the South Africa.
The South Africa is absolute leader in the production of commercial chrome ores; it provides more than 40% of the world output. This country possesses the most powerful resource base of chromite in the world; its sub-soil assets contain about three quarters of the chromium world’s reserves and almost 70% of the world’s resources of chromium ores.
The South Africa supplies part of the extracted raw materials to Asian countries, mainly to China, and Europe, being one of the world’s leading exporters of chrome ores. At the same time, South Africa is a leading producer and supplier of ferrochrome to the global market. Kazakhstan, India, Turkey, Armenia and Brazil are also leading countries in the area of chrome ores.
Kazakhstan ranks second in terms of the raw material base. Its contribution to the world production of commercial chrome ores is 15-20%. The biggest part of Kazakhstan’s chromite reserves are explored in the Kempirsay massif deposits. Average content of Cr2O3 in this ores reaches 50%, content of iron and harmful impurities (phosphorus and sulfur) is very low.
Kazakhstan chromium ore market
In 2018, Kazakhstan ranked third in terms of chromite production: 4.6 million tons. Production of chrome ores in Kazakhstan during 7 months of 2019 amounted to 4.1 million tons, which was 5.7% more than in the same period a year earlier (3.9 million tons). The production of chrome concentrates in 2019 increased by 5.3% and reached 2.9 million tons (in the same period of 2018 – 2.8 million tons).
The main segment of chromium consumption is the production of ferroalloys necessary for the steel industry. In January-July 2019, the total production of ferroalloys amounted to 1.3 million tons – 7.7% more than in the same period a year earlier (1.2 million tons).
The main part in the structure of ferroalloys production is occupied by ferrochromium: 86.8%. Its production during seven months of 2019 amounted to 1.1 million tons (10% increase compared to the same period in 2018 (1 million tons). Ferrosilicomanganese output decreased by 10% over the year, to 66.8 thousand tons: that was only 5.2% of the ferroalloys total production.
One of the world’s largest producers of chrome ore and ferroalloys with a unique resource base and the lowest level of unit costs is TNK Kazchrome JSC, which ranks second in the world in terms of production and supply of chrome alloys and first in the quality of chrome ore. The first place among the company’s ferroalloy products is occupied by high-quality high-carbon ferrochrome. The company also produces silicon and manganese alloys and refined ferrochrome.
In 2018, Kazchrome mined 5.6 million tonnes of chrome ore, production increased by 0.8% over the year. The production of ferroalloys also increased: 1.7 million tons in 2018, 1.6 million tons – in 2017 (7.1%).
Sales volumes were in direct correlation with the changes in the market situation and demand. The total revenue from sales of TNK Kazchrome JSC in 2018 amounted to 750 billion tenge (a year earlier – 702 billion tenge). The main buyers were China (42%), Japan (25%), Europe (16%), South Korea (7%) and the USA (6%).
According to the results of seven months of 2019, the production of chrome ores in Kazakhstan amounted to 4.1 million tons, which was 5.7% more than in the same period a year earlier (3.9 million tons). The production of chrome concentrates in the current year increased by 5.3% and reached 2.9 million tons (in the same period of 2018 – 2.8 million tons).
In January-July 2019, the total production of ferroalloys amounted to 1.3 million tons, which was 7.7% more than in the same period a year earlier (1.2 million tons). The main part in the structure of ferroalloys production was occupied by ferrochromium: 86.8%. Its production for seven months of 2019 amounted to 1.1 million tons. The production of ferrosilicomanganese decreased by 10% over the year, to 66.8 thousand tons (5.2% of the ferroalloys total production).
In 2019, export deliveries of chrome ores and concentrates decreased: minus 0.1% in tons (65.2 thousand tons in January) and minus 19.1% in money (USD 9 million). The main importer of chrome ore was Russia. The export of chromium oxides and hydroxides in tonnes increased by 2.3% (4 thousand tonnes), although in money terms it decreased – by 3.9% per year (8.2 million US dollars). The main importers of chromium oxide were the United Kingdom, Belgium and Germany. Exports of ferroalloys (including ferrochromium) decreased in tons by 3.2% per year (137.7 thousand tons in the first month of 2019), in money terms – by 11.8% (USD 169.2 million) The main importers of ferroalloys were China, Japan and the United States.
Impact of Covid-19 on the chromium market
In April 2020, there was a suspension of the production and export of chromium in the South Africa. CRU Group estimated that the South Africa produced 23 million tons of 36 million tons of global chrome concentrate production in the last year. About 12.5 million tons of chrome ore were shipped to China, accounting for 83% of Chinese imports of this product. The South African companies could still cut production by 6.5% or 1.5 million tons.
The upturn in the chrome ore market happened closer to mid-April. Previously, it was hampered by low prices for chrome products itself, ferrochromium and stainless steel, which were at a four-year low. Quotes for the South African concentrate UG2 with 42% of chromium oxide remained below $ 115 per tonne CIF China until the end of the first decade of the month, but by the end of April 2020 they reached $ 145 per tonne.
The reasons for this growth were the extension of the ban on production and external supplies of South African raw materials until May 1, 2020, doubts about the imminent recovery of pre-crisis production volumes, as well as an increase in prices for ferrochromium. In Europe, prices for April-June on quarterly contracts added almost 13% compared to the previous period, despite a drop in demand due to quarantine. In China, the rise in ferrochromium prices was even more impressive.
In May, the cost of chrome concentrate continued to rise. Towards the end of the month, South African UG2 concentrate with 42% chromium oxide content reached $ 160 per ton.
The May 2020 rise of chrome ore prices was caused by several reasons. First of all, the supply remained limited. Due to technical problems associated with the peculiarities of work in conditions of social distancing, the South African companies were unable to recover the extraction of this raw material quickly. According to the CRU (British company), supply disruptions might result in decrease of global chrome concentrate production by 5% compared to 2019.
At the same time, the demand for chrome raw materials was quite high, especially in China. The recovery of the economy from the recession caused by the coronavirus contributed to the expansion of stainless steel production and the rise of ferrochrome prices. If tenders held by leading Chinese metallurgical companies at the end of April gave rise to prices for high-carbon ferrochrome by 250 yuan (about $ 35) per tonne compared to the previous month, then a month later this material rose by 500 yuan per tonne.
However, the upturn in the Chinese ferrochrome market was short-lived. A number of companies from various countries quickly increased the export of these products to China, which led to a decrease in quotations. The weakening of ferrochrome pulled the ore down. The cost of South African material dropped to $ 165 per ton.
At the end of June, new tenders held by Chinese metallurgical companies showed a decrease of ferrochrome cost in the July contracts. Apparently, this led to further reduction of chromium concentrate cost.
December started with a decline of chrome ore price caused by unfavorable conditions in the ferrochrome market. After the Tsingshan Group in China lowered high-carbon ferrochromium prices at a December tender by 100 yuan ($ 15.3) per tonne from the previous month, quotations for South African UG2 concentrate with 42% chromium oxide content dropped to less than $ 130 per tonne CIF China – the lowest level since March 2020.
However, the ferrochrome market suddenly revived in the second half of December. Contributing factors were increased demand for stainless steel in China and Europe, as well as transport problems. Due to the lack of containers and the total tonnage, supplies of ferrochromium from India fell, which resulted in the rise of the South African material price.
Contracts for the supply of charge chrome in the first quarter of 2021 in the European Union were concluded with an increase of 3.1% compared to the previous quarter. Prior to that, quotes were at the same level for nine months. A rise in the price of ferrochromium due to interruptions in the supply of electricity to ferroalloy plants also occurred in China.
The rise in ferrochromium prices contributed to the rise of chrome ore prices. Moreover, the main suppliers of this raw material from the South Africa and Turkey have reduced exports to China, thereby reducing stocks in ports.