Chromium is an essential industrial product. More than 90% of the world's chromium production is used to make ferrochrome, a mixture of chromium and iron ore produced through a high-temperature smelting process.
Ferrochrome typically has a chromium content of 50% to 70% by weight. Ferrochrome is used in the production of stainless steel, which is made from a mixture of iron ore and ferrochrome.
Stainless steel products contain 10-30% chromium. The properties of chromium make the steel stronger and less susceptible to rust. Stainless steel is used in cutlery, cooking utensils (pots, pans, etc.), home appliances (irons, refrigerators, stoves, etc.), kitchen sinks, medical equipment, construction materials, aircraft bodies (airplane fuselages), and automobile and airplane engines. It ranges widely from. Among other things.
The remaining small portion (approximately 5%) of the world's chromium production that is not used to make stainless steel is used to make products such as paints, ceramic tiles, and wood preservation products.
In the steel industry, there is no substitute for chromium as there is no substitute for it. Because of its importance, the U.S. Geological Survey has declared chromium one of America's most important and strategic minerals.
As of 2019, the United States imports approximately 71% of its needs, with the remainder (29%) coming from recycled stainless steel. The United States uses at least 6% of the world's chromium production, but it is not mined domestically.
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Meanwhile, China is the largest stainless steel manufacturer, accounting for half of the world's (stainless steel) supply (55% in 2023).
However, like the United States, there are no mineral sources within the territory. Therefore, it also relies on imports of chromium ore and ferrochrome to keep its vital steel industry operating.
According to some reports, China imports 84% of the world's chromium production. If this is true, China and the United States alone would account for about 90% of the world's chromium consumption (84% + 6%, respectively).
When it comes to mining chrome ore, only six countries have a production capacity of more than 1 million tons per year. These were South Africa, Turkey, Kazakhstan, India, Finland and Zimbabwe, producing 18 million tonnes, 6.9 million tonnes, 6.5 million tonnes, 4.2 million tonnes, 2.2 million tonnes and 1.5 million tonnes. , respectively in 2022.
As for South Africa, it has approximately 72% of the world's commercially available chromium reserves and produces almost half (50%) of the world's production each year.
Zimbabwe is in luck as it has 12% of the world's chromium ore reserves. However, due to the many challenges associated with this sector, the country currently produces less than 4% of the world's total output.
Low-reserve countries such as Turkey, Kazakhstan, India and Finland already produce more than twice as much as Zimbabwe, despite having much smaller underground mineral reserves.
Of the three countries mentioned above, Kazakhstan has about 4% of the world's reserves, and Finland 2%. Meanwhile, Turkey and India each have less than 1% of the world's reserves.
Reasons for poor Zim performance
Zimbabwe's chrome value chain is exposed to a number of negative issues.
First, even though the country's chrome is generally of a higher quality than South Africa's, local miners (particularly small-scale miners) sell their product at much lower prices.
South African chromium ore grade UG2/MG, which has a low chromium content, was being purchased for approximately US$281 per tonne as of January 2023, but Zimbabwean miners received only US$70 per tonne. It had been presented.
Other chromium mining authorities, including South Africa's leading chrome and platinum miner Talitha Minerals, argue that Zimbabwean chromium is comparable to Turkish chromium, which sold for about $350 to $360 per tonne during the same period. (January 2023).
These disparities simply mean that local small-scale chrome miners are unable to expand production and have to shut down operations due to lack of viability due to artificially depressed prices. .
According to the report, local ferrochrome producers (smelters) manipulate the price of chrome ore to buy from small-scale miners who sometimes have nowhere to sell to due to frequent government export bans. It is said that there is. Protect and support local chrome smelters (ferrochrome producers).
Large miners typically have their own smelters and are therefore less susceptible to such pricing issues.
Second, both the country's chrome miners and smelters (ferrochrome producers) are challenged by transportation and “high” electricity costs.
The absence of a reliable rail system means that freight trucks are used to deliver raw materials (chromium ore) to factories and unload processed products (ferrochrome) to export markets (Maputo, Beira, and other South African ports). means it is necessary.
This is a major drawback, as road freight moves much less chromium ore and ferrochrome than rail. Road transport costs are also very expensive.
Without reliable rail infrastructure, processors will continue to produce below optimal levels.
Local electricity costs are also considered high by processors, as turning chromium ore into ferrochrome requires smelting at temperatures above 1600⁰C.
The smelter therefore continues to beg the government to give it access to cheaper electricity, even though it already enjoys lower rates than other Zesa customers. In some cases, Zesa may charge smelters as low as US$0.06 per kilowatt, even though producers are demanding even lower rates.
Third, governments continue to struggle to develop coherent and mutually effective chromium policies that mutually benefit small-scale miners, smelters (ferrochrome producers), local communities, and the economy as a whole. doing.
This is evidenced by inconsistent policies regarding chromium over the past two decades. For example, export bans on chrome ore were implemented from 2007 to 2009 and from 2011 to 2015, due to a lack of capacity on the part of local processors (smelters) to purchase available chrome ore. , was eventually lifted.
Small-scale miners have had to shut down operations multiple times because domestic smelters have been unable to purchase their output.
There is also an updated ban on the export of raw chrome ore, which remains in effect. This latest ban was announced in August 2021. Due to frequent export bans and a mismatch in production capacity between smelters and chrome ore miners, Zimbabwe's chromium production tends to be generally unstable and remains below reserves-poor countries such as Turkey. Kazakhstan, India, Finland.
Export taxes on chrome ore exports were also introduced in 2007, but were abolished in 2015. A consistent and effective chromium ore policy would have made Zimbabwe the world's second largest chromium ore producer after South Africa.
This will lead to higher domestic GDP growth, foreign exchange earnings and employment levels.
strategy for domination
Coincidentally, many of the problems associated with Zimbabwe's chrome industry also plague the South African industry. Smelters in South Africa also find subsidized electricity prices too expensive and at the same time are negatively affected by load shedding.
The South African government is also considering imposing a tax on chrome ore exports to protect and support the smelting industry, which employs thousands of people and is a key contributor to the income earned by state-owned electricity provider Eskom. ing.
If South Africa's smelters go out of business, Eskom stands to lose a lot of revenue as the economy slumps. To demonstrate the importance of ferrochrome producers in South Africa, around 2013 they were consuming as much as 5% of the national electricity supply.
Since only six countries in the world produce significant amounts of chromium, it is important to establish a consultative forum where the six countries can discuss common challenges and opportunities for cooperation.
Maybe they're all struggling to keep their businesses (miners and smelters) afloat. If so, it may be necessary to emulate the excellence of OPEC (Organization of the Petroleum Exporting Countries), whose members regulate the production of petroleum products in order to obtain healthy profits.
The 14 members of OPEC understand that oil is a critical resource. Therefore, they adjust the supply to other parts of the world to be kept at a level that is profitable for them.
When there is an oversupply of oil on the world market, OPEC countries cut production to create scarcity, resulting in oil prices remaining high.
This is beneficial for them. Similarly, chromium-producing countries are required to implement a uniform export tax (20% to 50%) on chromium ore, and consuming countries are required to use one chromium-producing country to compete with other chromium-producing countries. will no longer be possible (due to the refusal of chromium producing countries to introduce it). tax). This increases government revenue and leads to the establishment of more chrome processing industries (smelters) in producing countries.
Introducing a universal tax on chromium ore exports would also increase the price of ferrochrome (refined, processed chromium) by increasing its price increase flexibility.
This will also improve the smelter's profitability and allow it to operate at normal electricity rates (tariffs).
As it stands, Zimbabwe and South Africa, which hold about 85% of the world's chromium reserves, are struggling with viability. This clearly shows that they are subsidizing world prices for both chrome and stainless steel.
This also means that they are subsidizing the global economy by accepting lower chrome prices than are economically viable.
Therefore, rather than subsidizing electricity to local smelters, countries should strive to ensure that the price of chromium and its related products is sufficient to cover all costs associated with its production. Should.
If the tax goes into effect, authorities and security agencies will also need to be on high alert to ensure that power and rail infrastructure is not exposed to sabotage. The sabotage could be the result of unwanted retaliation from the world's major consumers. Pay a high price for chrome.
Other important changes in the chromium value chain include encouraging smelters to set up their own power plants.
Licensing of such power plants should be expedited, while sustainable technologies such as cogeneration (by recovering heat from factories to generate electricity) should also be promoted. .
This is very important because chromium smelting is energy intensive. Without creating independent power opportunities, ferrochrome producers could cause severe power shortages in other parts of the country.
It also allows miners access to more customers (domestic and international) and exports to encourage the growth of chromium extraction and the payment of competitive (fair) prices to small-scale miners. The ban needs to be suspended.
Finally, rail infrastructure must be available to both chrome miners and smelters to keep production costs low and production high.
If industry challenges are effectively addressed, it is entirely possible to triple Zimbabwe's chromium production to 5 million tonnes within the medium term (1-3 years).
Mr. Tutani is a political and economic analyst. — tutanikevin@gmail.com
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