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Rock Chromite - World Markets Outlook Superb!

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Rock Chromite - World Markets Outlook Superb!

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===========================

All tight for

chromite

Unrelenting global demand for chromite is

squeezing special grade chromite supply

and pushing prices to unforeseen heights

Alison Tran, Asia Correspondent

Supply of world chromite

(chrome ore) has come under

severe pressure over the

past year driven by robust

demand for ferrochrome used in ferroalloy

production, ultimately used to make

stainless steel.

With the metal industry hungry for raw

material, residual supplies that typically

serve non-metallurgical markets (known

as “special grades” for the refractory,

chemical, and foundry sectors) are selling

out.

Over 90% of the world’s chromite

production is converted into ferrochrome

for metallurgical applications, a figure

that dwarfs supply to non-metallurgical

markets. Out of a total global chromite

annual output of about 19m. tonnes, the

refractory industry accounts for about 1%

while 3% each is consumed in the foundry

and chemical industries.

Given that most chromite is produced by

vertically integrated ferrochrome producers,

the amount of material available to supply

non-metallurgical markets is dictated

by the fluctuating requirements of the

metallurgical industry.

Over the past year, unrelenting demand

for ferrochrome for ferroalloy production

and a shortage of material has created a

deficit, working wonders for

deficit, working wonders for

prices, and of course suppliers’ profits.

“Chromium 2007”, the conference

organised last month in Beijing by the

International Chromium Development

Association (ICDA), provided much

anecdotal evidence of this. Alluding to

the current buoyant market conditions,

Jim Cochrane, CEO of the Eurasian

Natural Resources Corporation (ENRC),

Kazakhstan, welcomed the “many happy

faces” in his opening address. Whilst

producers were upbeat with many price

negotiations taking place on the wings,

purchasers of chromite on the other hand,

were frantically making enquiries for

additional sources of supply.

Supply sells out

Leading traders of non-metallurgical

chromite from South Africa, source of over

50% of the world’s chromite, report that

they have been inundated with requests

and are sold out of material for several

months in advance. “We are trying to

support our markets in the best way we

can,” said Michael Lillja, sales agent for

Samancor Chrome. “Although we have not

reduced our tonnages this year, prices are

definitely rising”.

The supply crunch has come at a

time when demand for chromite for

non-metallurgical applications is gaining

momentum. According to statistics from

the ICDA, consumption by both the

metallurgical and foundry industries

increased by about 10% in 2005 –

metallurgical from 16.2m. tonnes to 17.9m.

tonnes, and foundry from 494,000 tonnes to

542,000 tonnes.

Refractory consumption increased by

19.5% in 2005 from 101,000 tonnes to

125,000 tonnes. The chemical industry

consumed less chromite with a decrease

S

CHROMITE

All tight for

chromite

Unrelenting global demand for chromite is

squeezing special grade chromite supply

and pushing prices to unforeseen heights

Alison Tran, Asia Correspondent

Chromite ore and concentrates production by end use sectors, 1999-2005 (tonnes)

End Uses 1999 2000 2001 2002 2003 2004 2005

Metallurgical 13,061,408 13,752,459 10,768,124 12,688,135 13,825,627 16,253,943 17,878,073

Refractory 106,263 157,882 162,472 127,861 118,143 101,012 125,462

Chemical 704,009 815,154 1,000,390 863,645 768,027 752,735 595,200

Foundry 396,890 318,011 345,105 431,761 420,321 494,761 541,974

Total 14,268,570 15,043,506 12,276,091 14,111,402 15,132,163 17,602,451 19,140,709

Source: International Chromium Development Association (ICDA)

June 2007 33

CHROMITE

of 21% from 752,000 tonnes to 595,000

tonnes.

In 2005 total chromite consumption

increased by 8% from 17.6m. tonnes to

19.1m. tonnes. The accompanying table

shows how production patterns have

increased over time.

Stainless soars

Largely to blame for the current supply

and demand imbalance is growth in the

stainless steel industry, which accounts

for more than 90% of ferrochrome

consumption. Global stainless steel

output was estimated to have reached

almost 28m. tonnes in 2006, a 14%

increase over 2005. Driving growth

has been China which produced 5.3m.

tonnes of stainless steel in 2006, a

massive 68% increase over 2005.

This year, Chinese capacity continues

to rise in all areas of stainless steels.

Soaring prices of nickel, a constitutent

of widely used austenitic steel, has

resulted in more demand for ferritic steel

which consists of iron and chromium

(min. 10.5% Cr) and contains no nickel.

Japanese mills are also operating at high

utilisation rates and are seeing strong

demand.

Analysts estimate that China will

increase stainless steel output by an

additional 2m. tonnes in 2007. This

means that about 800,000 tonnes of

additional ferrochrome will be needed,

which will put further pressure on

supplies of chromite.

According to a presentation given at

last month’s ICDA conference by Tu

Kun of Minmetals, China imported

4.32m. tonnes of chromite in 2006. In Q1

2007, China had already imported 1.33m.

tonnes of chromite, a 100% increase over

last year. If imports continue at such a

pace, China looks set to import a total

5m. tonnes of chromite this year, up

16%.

Premium prices

The growing difference between

supply and demand is driving prices up

almost monthly for non-metallurgical

grades. Latest prices of South African

chromite ore (wet bulk, FOB north West

Province) are $240-260/tonne for foundry

grade (45% Cr2O3), and $255-275/tonne

for refractory grade (46% Cr2O3). This

compares to $185-210/tonne and $225-

245/tonne respectively at the start of the

year.

Higher foundry grade prices have had

a domino effect on chemical grades (46%

Cr2O3) as they are often coproduced

with foundry grades and in tight market

conditions are used interchangeably.

During April-May 2007, prices for

chemical grade hit the $210/tonne mark,

up from a range of $165-173/tonne in

January 2007. The accompanying chart

shows how pricing have been moving

upwards over the recent years.

Now, with metallurgical grade spot

prices rising sharply, it is obvious which

market producers are choosing to supply.

To secure material, non-metallurgical

chromite consumers are having to match

metal prices, or face going without

material. Zelda du Preez, chief executive

officer of Rand York Minerals Pty,

exclusive sales agent for Xstrata, said:

“Consumers have no choice but to pay

higher prices, or they simply will not get

material”. It is understood that Rand

York has now sold out of material and is

turning away new orders.

Indian tariffs

A number of other factors have pushed

prices higher in recent months. In

India, the government imposed a

tariff on the export of chromite and

concentrate of Rs2,000/tonne ($44/

tonne) which took effect 1 March

2007.

The measure, which came in

response to a domestic shortage, has

placed added pressure on already

tight world supply especially to China,

which consumes 30% of India’s total

chromite output.

Until now, India has been the

supply source of choice owing to

comparatively lower prices. Chinese

ferrochromium producers usually

blend Indian chromite with material

from other sources. Now these are on

a par, if not higher, than South African

material. With effect from April 2007,

prices of concentrates rose from $200/

tonne to $347/tonne FOB. Tata Steel

suspended exports and domestic sales

of ore to ferrochromium producers in

order to supply its own projects.

0

50

100

150

200

250

300

Jan-03

Apr-03

Jul-03

Oct-03

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

May-07

Chromite, Transvaal, Chemical grade, 46% Cr2O3, FOB Transvaal, wet bulk, $ per tonne

Chromite, Transvaal. Foundry grade, 45% Cr2O3, FOB Transvaal, wet bulk, $ per tonne

Chromite, Transvaal, refractory grade, 46% Cr2O3, FOB Transvaal, wet bulk, $ per tonne

Key:

Price history of South African chromite special grades 2003-07

Source: Mineral PriceWatch

June 2007 35

CHROMITE

South African export ban threat

To make matters worse, talk of an

imminent ban on the export of raw

unbeneficiated chromite from South

Africa has led to some panic buying in the

market lately. The concern came after

the Deputy President Phumzile Mlambo-

Ngcuka said that the government was

planning new legislation preventing South

African chromite producers from exporting

unbeneficiated chromite.

Domestic ferrochrome producers,

notably Xstrata and Merafe, have been

lobbying the government this year,

arguing that short chromite supply is

detrimental to the country’s ferrochrome

producing capabilites. South Africa’s raw

chromite exports to China increased from

760,000 tonnes in 2005 to 1m. tonnes in

2006.

Given that beneficiated chrome is ten

times more valuable than unbeneficiated

chrome, South Africa is understandably

concerned about losing added value

benefits as well as employment

opportunities, through uncontrolled

export of raw chromite ore.

Xstrata claims that its South African

ferrochrome operations lost 16% of market

share in 2006 because of chromite exports

to China. In an appeal, Xstrata referred

specifically to Samancor Chrome, the

country’s largest ferrochrome producer.

It is understood that Samancor had

been exporting significant tonnages raw

material to China as its own smelters

were running at full capacity. Kermas

has admitted to exporting chromite raw

material to China, but has said this has

now ceased. The company has started

to sell what surplus of chromite it has

to other local ferrochrome producers for

further beneficiation in South Africa.

Although traders have said that nonmetallurgical

grades would not be directly

impacted, the mere mention of a possible

ban sharply increased metallurgical grade

chromite prices by $20/tonne in mid-

March 2007 which had a knock-on effect

for chemical grade prices.

At last month’s chromium conference

in Beijing, opinions were mixed about

whether an export ban would actually be

imposed. Certain industry participants

maintained that with South African

furnaces running at full capacity last year,

it was understandable that ferrochrome

producers exported chromite to China

given the high prices and overwhelming

market demand.

One South Africa-based chromite

producer said: “The general feeling was

that in the grand scheme of world politics,

a ban is unlikely to be implemented in

the near future.”

Sources of supply

Perhaps one of the main challenges

for purchasers of non-metallurgical

chromite is that consumers do not

have a huge choice when it comes to

supply. Production is concentrated

in just a few countries, notably South

Africa which produces about 50% of the

world’s chromite, followed by India and

Kazakhstan producing about 20% and

15% respectively.

South Africa is by far the main supplier

of non-metallurgical grades, with smaller

tonnages provided by the Philippines,

Turkey, Pakistan, India, and Iran. The

latter two principally produce for the

domestic market. What is more, the

market in South Africa is dominated by

a few key producers, Xstrata SA Chrome

Venture and Samancor Chrome, both

based in South Africa.

Just over 20% of world chromite ore

production is traded. Most chromite

producers are vertically integrated into

ferrochrome production. While certain

ferrochrome producers sell direct to

end users, they allot residual amounts,

usually determined on a quarterly

basis depending on market needs, to a

handful of independent traders which

play an important role in supplying

material to non-metallurgical markets,

these include: Rand York Minerals Pty

Ltd, Independent Mineral Distributors

Pty Ltd, South Africa; Plomp Minerals

Services BV, the Netherlands; Cofermin

Rohstoffe GmBH, Minelco GmbH,

Germany, among others.

Changing trade trends

As a result of market pressures, importing

countries are revising their import

strategies. Addressing the pertinent issue

of future supply Wang Min, vice minister

of Land & Resources, said that China was:

“Intensifying its development activities

and working out a mutually beneficial

mining strategy to source chromite from

diversified sources to secure supply for

phenomoneal steel industry growth”.

Wang mentioned Albania, Russia,

Turkey, and Tibet as future sources of

increased chromite supply.

For the first quarter of the year, the

amount of chromite imported from India

to China dropped considerably, whilst

the amount imported from South Africa

remained the same (860,000 tonnes).

Exports from Turkey increased markedly

and this year about 80% of the country’s

exports will be destined for China.

Adjusting to market demand

China’s changing sourcing strategy is

already having an impact on supply of

non-metallurgical chromite as producers

adjust output to meet the growing

demand.

A case in point is Turkish chromite

producer, Bilfer Madencilik AS. The

company traditionally supplies most

concentrates to the refractory and foundry

industries. Owing to high demand from

metallurgical industries, Bilfer is to now

reopen some of its mines which closed

over a decade ago owing to the then low

chromite prices and low cut of grades.

Sözer Özel, president and CEO, said:

“Due to the high demand and high prices

of metallurgical chrome products, we are

in a stage to increase our production and

selling some of our stocked refractory

products to metallurgical industries”.

World chromium ores & concentrates

production 2005

Country Production (tpa)

Albania 170,000

Australia 70,334

Brazil 616,534

China 220,000

Cuba 34,000

Finland 572,000

India 3,442,880

Iran 223,563

Kazakhstan 3,581,242

Madagascar 140,847

Myanmar 3,000

Oman 18,386

Pakistan 46,359

Philippines 36,070

Russia 772,000

South Africa 7,502,762

Sudan 21,654

Turkey 688,377

Vietnam 90,000

Zimbabwe 614,720

Total 18,900,000

Source: British Geological Survey

June 2007 37

CHROMITE

Another major incentive in supplying

the metallurgical market relates to the

extra processing involved in producing

material for refractory and foundry

industries. Özel said: “The production of

chromites and concentrates used in the

refractory or foundry industry needs extra

processing and results in loss of chrome

units during the production process. This

means extra costs and not all chromites or

concentrates that undergo extra processing

can be used in refractory or foundry

industries”.

He added: “During 2006, the price of

refractory and foundry grades was 30-100%

more expensive (depending on products)

than metallurgical grades. What we are

experiencing now, is that refractory and

foundry buyers are not ready to digest

the possible refractory and foundry prices

comparatively to metallurgical prices. I

think that, in the coming months nonmetallurgical

grade prices also will settle at

certain levels but not with premiums 30-

100% as it was in 2006.”

Mid-May 2007, Turkish chromite units

(per 1% of Cr2O3) for the metallurgical

market were selling at $7.5-8.5/ Cr2O3 unit

depending on quality and size (bulk, FOB

Turkish ports) with lumpy high grade ores

fetching the highest prices.

Supplier highlights

The following are some highlights

from leading suppliers (producers and

processors) of chromite.

South Africa

South Africa is the world’s largest producer

of chromite and a leading supplier of

ferrochrome. Reserves are located in the

Bushveld Igneous Complex (BIC), a

saucer-shaped deposit in the northern and

north-eastern provinces of South Africa.

Chromite is mined along the eastern and

western rims of the complex.

Assmang Ltd

Assmang Ltd is essentially a ferrochrome

producer. Apart from a regular small-scale

offtake of chemical grade concentrate, the

company only sells chromite products

on an ad hoc basis. “Whilst we did have

a plan to produce foundry material,

we decided not to proceed after

having determined that our output of

suitably sized material would be very small,

essentially due to the crystal size in the

ore”, said Alistair McAdam, chrome sales

manager, Assmang.

The chrome division consists of

the Dwarsrivier chrome mine and the

Machadodorp ferrochrome works both in

Mpumalanga. All the chromite production

from Dwarsrivier Mine is now sourced

from the new underground mine as the

opencast reserves were exhausted in 2005.

Production from underground is

gradually increasing towards the current

design capacity of 100,000 tpm chromite.

Dwarsrivier Mine is specifically geared to

deliver quality metallurgical chromite to

Machadodorp, although the beneficiation

plant can also produce chemical and

foundry grades.

Samancor

Samancor Chrome is one of the largest

producers of chromite in the world.

In 2005, Samancor Chrome’s two

shareholders, BHP Billiton and Anglo

American PLC, sold the company to

the Kermas Group for $469m. The

Kermas Group is a producer and trader in

ferrochrome and chrome chemicals, with

activities in Russia, Germany and Turkey.

Samancor Chrome’s mines are located

on the eastern Eastern Chrome Mines

(ECM) and Western Chrome Mines

(WCM) limbs of the Bushveld Igneous

Complex north of Johannesburg. Typical

production levels amount to some 3m. tpa

of saleable chromium ores for both internal

consumption (approximately 2.3m.tpa)

and local and export sales (approximately

700,000 tonnes).

Most non-metallurgical grade chromites

are sourced from the WCM business unit.

In 2005, WCM produced 229,634 tonnes of

foundry grade chromite, while Samancor’s

Eastern Chrome Mines’ output was

66,785 tonnes. Samancor’s total chromite

production was 3.2m. tonnes, of which

309,667 tonnes was chemical grade, and

48,600 tonnes was refractory grade.

Samancor Chrome supplies a broad range

of foundry sands having a silica content

<1% and chromium content >46.0%,

and specifies AFS (American Foundry

Standard) ranges of between 46- 60 with

typical acid demands of between 5-3 for

pH 3-5. The pH of Samancor’s foundry

grades is typically between 8-9.5.

Samancor Chrome also produces a

significant tonnage of chemical grade

product for use by the chrome chemical

industry, where it is the feedstock for

the production of sodium dichromate.

This grade has a low silica content and

has been well-accepted by the industry.

The company is currently undertaking a

feasibility study for a chrome chemicals

plant to be built in Middleburg, which,

if approved, would require a R800m.

investment.

Xstrata

Xstrata South Africa operates five chromite

ore mines. In 2005, the company produced

Assmang Ltd’s chrome division consists of the Dwarsrivier mine and the Machadodorp ferrochrome plant both in Mpumalanga, pictured here.

Dwarsrivier Mine is specifically geared to deliver quality metallurgical chromite to Machadodorp, although the beneficiation plant can also produce

chemical and foundry grades. Courtesy Assmang Ltd.

June 2007 39

CHROMITE

3.6m.tonnes of chromite ore, compared

with 4.2.m. tonnes in 2004.

Rand York is the exclusive sales agent

of Xstrata and markets the company’s

non-metallurgical grades. Rand York dries

and repacks material from Xstrata in its

own bags and sells on to end users. The

company is focused mainly on the export

markets. Once dried and bagged, much

of the material is transported to Durban,

South Africa where the material is stored

and most of the exports take place.

International Ferrometals Ltd (IFM)

International Ferrometals Ltd (IFM),

an Australian company, operates the

Buffelsfontein mine and ferrochrome

smelter facility situated in South Africa’s

Bushveld, north-west of Johannesburg.

IFM aims to be one of the world’s

lowest cost ferrochrome producers through

the use of the latest mining technology

and integrated mine and processing

plants. Two furnaces have been installed

enabling a production of 267,000 tpa of

charge ferrochrome. The first batch of

IFM’s ferrochrome was shipped in the first

quarter of this year.

Newly established Itshe Resources (Pty)

Ltd has the exclusive marketing rights for

the foundry and chemical chromite grades

produced by IFM (see News at the Core).

Kazakhstan

Kazakhstan is the world’s second largest

producer of chromite. Eurasian Natural

Resources Corporation (ENRC) is the

country’s leading producer. It owns

Donskoy Ore Mining & Processing, one of

the largest chromite mining and processing

enterprises in the world. About 30% of

its total chromite production is used to

produce chromium chemicals.

Aktyubinsk Chromium Chemicals

Plant (ACCP) is one of Kazkhstan’s main

chemical chrome producers. The company

has produced sodium dichromate since

1957, chromic acid since 1965 and chrome

sulphate from 1970. ACCP is located in

the Aktyubinsk region of west Kazakhstan.

India

India is the world’s third largest producer

of chromite ore. The country produces

about 3.5-4m. tpa of chromite ore.

The government’s recent decision to

impose a hefty export tax is aimed at

securing supply for domestic ferrochrome

production.

Most production is located in the state

of Orissa where the majority of chromite

is used in the domestic ferrochrome

industry. There are about 20 mines of

chromite ore in India mostly government

owned. Chromite produced in Orissa

practically meets all the requirements of

the industries located in different parts

of the country which include chemical

manufacturers and refractory plants.

Some important leaseholders are Tata

Iron & Steel Co. (TISCO), Orissa Mining

Corp. (OMC), FACOR Alloys Ltd,

Mishralal Mines, BC Mohanty and Sons,

IDC of Orissa Ltd., Indian Metals & Ferro

Alloys Ltd (IMFA), and Indian Charge

Chrome Ltd (ICCL).

Philippines

Chromite production increased in volume

and value by 30% and 42%, respectively

in 2005, according to the Mines and

Geosciences Bureau/Department of

Environment and Natural Resource.

Growth was due to an increase in

production volume and value of refractory

and metallurgical chromite ores.

Both Benguet Mining Corp. and

Krominco Inc. increased production

volume. CRAU Minerals Resources

Corporation and Heritage Resources &

Mng. Corp. suffered “production deficits”.

Turkey

Turkey is a growing supplier of chromite

to the Chinese ferrochrome markets.

Chromite is mined seasonally from May

to end November owing to harsh winter

conditions at high altitudes where most of

the open pit chrome mines or concentrators

are located.

One of the leading producers of chromite

is Bilfer Madencilik AS. The company

supplies most of its concentrates to the

refractory and foundry industries. One of

its largest customers is RHI AG to whom it

supplies about 2,000 tpa of refractory grade

chrome used in sliding door applications.

Turkish chromite is priced at a premium

because of its high opening rate (99%).

Sözer Özel, president and CEO, said that

demand for foundry grade chromite in

Turkey for precision castings was growing

at an annual rate of about 10%.

Other producers include: Dedeman

Madencilik Sanayi ve Ticaret AS,

New supply projects

China’s current commodity vortex is making the case for investing in chromite increasingly compelling. A number of projects which aim

to increase supply of raw material to non-metallurgical markets are in the pipeline (see News at Core for further details):

Lanxess

In May 2007, the only chrome chemicals producer in South Africa, Lanxess (formerly Bayer AG), announced that 80m. tonnes of “extra

ore reserves have been found” in its Rustenburg chromite mine in North West Province, South Africa. Lanxess is currently drawing up a

concept for mining these additional volumes and has already invested 5m. in measures to improve efficiency and safety at the site.

Chromex Mining

In another development, Chromex Mining Plc, a dedicated chrome company established to acquire, control, and expand chromite

mining and processing facilities, announced in April that is has now completed a bankable feasibiliuty study (BFS) to mine chromite ore

at the Mecklenburg Project, situated on the Eastern limb of the Bushveld Complex in the Limpopo Province of South Africa, an area

with a long history of chromite mining.

Oregon Resources

In the USA, Oreogon Resources Corp., owned by the Industrial Minerals Corp., is proceeding with the development of a heavy minerals

project in Oregon which includes the production of chromite ore from a surface mine. Listed on the Australian Stock Exchange in

November 2006, Industrial Minerals Corp. has been established primarily for the purpose of developing the project.

40 June 2007

CHROMITE

Eti Elektrometalurji AS General

Management, and smaller producer Hayri

Ogelman Mining Co.

Brazil

Brazil produces about 600,000 tpa of

chromite, only a small percentage of

which (less than 10%) is exported. Most is

consumed by the domestically produced

ferrochromium, demand for which is

growing on the back of expansion of the

local stainless steel industry.

Magnesita SA produces refractory grade

chromite for the production of direct bond

and re-bond chrome containing bricks for

the domestic steel industry.

CMMP

CMMP, a leading French minerals

producer, processes around 5,000 tpa of

chromite at its Picardy plant. Chromite

is just one of a number of minerals the

company processes which include zircon,

mica, iron oxide, vermiculite, and rutile.

In terms of volume, chromite is CMMP’s

largest processed product after zircon and

mica.

Chromite processed by CMMP is used

to supply the glass, ceramics, foundry, and

brakes market. Joëlle Briot, director, said:

“We are selling outside France more and

more. This is a slow movement : all these

markets are very conservative”. CMMP

is in “very good health globally with a lot

of projects coming on stream.” Briot said

that CMMP’s turnover in 2006 was up

30% on 2005.

Commenting on recent movements in

chromite prices Briot said: “We see today

more an increase in price, than a shortage

in quantity. I hope that the prices will not

increase too much, in order not to have

our European industry suffer too much

more in world competition with Asian

industries : if chromite prices are the same

for everybody, safety, environmental, and

labour regulations are not yet the same

everywhere.”

Mineralmahlwerk Hamm GmbH

Mineralmahlwerk Hamm GmbH

(MMW), established in 1961, is a high

performance mineral processor, mainly for

the refractory and foundry minerals, and

for almost all the large European trading

companies.

MMW has a production capacity of over

200,000 tpa and utilises four crushing

plants and nine combined grinding

and sieving plants. MMW operates a

dedicated chromite processing plant

where the imported wet bulk material

from South Africa is dried, coarse particles

screened off, and very fine dust particles

(<0.063mm) are removed by air separator.

On average, MMW processes around

30,000 tpa of chromite.

Markets

If Asian growth prolongs the industrial

metals rally, there should be room to

support new material on the market for

non-metallurgical grades. Despite the high

prices at present, chromite suppliers say

that they are not experiencing any drop in

demand. The attractions of chromite are

many and economic substitues are few.

Foundry – strict specifications

In the foundry industry, chromite is

used as moulding sand to produce

castings. Chrome is useful here as it has

a low coefficient of thermal expansion,

and has good heat transfer properties.

These grades have a low silica content

and are screened to give a specific size

distribution. Acid demand values as well

as pH of these products are also important

to the user.

World consumption of chromite in

the foundry industry is on the rise and

currently stands at around 600,000

tpa. When asked if higher foundry

grade pricing was leading to increased

substitution in the market, Zelda Du

Preez said: “There is a lot of talk but so

far we are not seeing it”.

Chromite’s major competitors are zircon,

olivine, and silica, the prices of which are

also trending upwards. Arnik Plomp of

Plomp Mineral Services BV commented:

“There are threats, but as long as the

price of zircon stays high and olivine is

not suitable for most of the applications,

foundry grade [chromite] will be used”.

South Afirca is by far the largest supplier

of chromite to the foundry market,

accounting for over 90% of exports to

Europe. The remainder is mainly from

Albania. South African material is unique

as the mines contain large crystals that

require little milling and crushing because

they are pure, making them more suitable

than other sources for foundry grades.

Material from India, Kazakhstan, and

Turkey is not as pure and requires more

crushing and processing. The silica

content also tends to be higher.

For foundry grades it is important to

keep silica levels low (<1.0%; SiO2) and

reduce dust particles as much as possible.

Acid demand values as well as pH of these

products are also important to the user.

The UK, Germany, and the

Netherlands are Europe’s main importers

of chromite, and in 2004 the Netherlands

imported some 85,574 tonnes. The local

market in South Africa is estimated to be

around 40,000 tpa.

In the past year, increasing demand has

also come from China where the foundry

industry is booming thanks to a rising

number of Sino-foreign joint ventures.

It is also growing in India and Russia.

It is difficult to assess by how much

the market is undersupplied. Traders

World consumption of chromite in the foundry industry is on the rise and currently stands at

around 600,000 tpa. Customers have been demanding a much narrower range in grain sizes as

well as chemical analysis. Courtesy Inductotherm Corp.

June 2007 41

CHROMITE

questioned estimated that it is less than

5%.

Suppliers report that over the last few

years customers have been demanding

a much narrower range in grain sizes as

well as chemical analysis, and this trend

is expected to continue. The reduction

in fines is particularly important when

supplying foundry sand. This is because

any excess fines or dust will disrupt the

synthetic binder added to the sand by the

end user and produce an inferior finish

on the castings. It may also force more

binder to be used, which is an expensive

component in the sand casting process.

Given the tight availability of foundry

sand chromite at the moment, however,

end users have been accepting lower

quality grades. This is a direct result of the

lack of availability in supply of high quality

grades. While the main requirement is

not too many fines and low silica, some

customers have been accommodating

grades with higher silica content and fines.

Commenting on the outlook for chromite

in foundry applications, Arnik Plomp said:

“More recycling systems for chrome will

be installed to decrease the consumption

in the foundries, when price stay on higher

levels for a longer period of time.”

Chemical – some recovery

The chromium chemical industry which

consumes about 550,000 tpa of chromite

sand is finally improving after a period of

excessive supply in the early part of the

decade.

A major factor which negatively

impacted the industry was the phase out

of timber treatment using chromate copper

arsentate (CCA) inititiated by the US

Environmental Protection Agency in 2002.

This move wiped out around 75% of the

US CCA market almost overnight.

Since then, major restructuring and

consolidation among the leading chrome

chemical producers has helped recovery.

Notably, Elementis Chromium, acquired

the chromium business of Oxychem

in 2002 and idled its own operations in

Corpus Christi. The company also agreed

to supply dichromate to two Japanese

producers after they closed their plants.

As a result of the reduced supply,

demand balance was improved. In the

first half of 2006, part of its Eaglescliffe,

UK plant was closed, reducing capacity by

25%.

At the same time, Elementis embarked

on an “aggressive price improvement

programme” by leading an industry

wide price increase which resulted in a

21% increase in average prices in 2005

compared to 2006. In 2006, the company

reported that average selling prices in 2006

were around 11% higher than the previous

year.

The company has said it is trying “very

hard to balance costs (namely energy and

chromite) and push prices up.” Without its

own chromite reserves, it is highly sensitive

to the risk of raw material price increases,

particularly in markets where there are a

small number of suppliers like chrome.

The company recently completed the final

period of a five year fixed price chromite

contract and is in negotiation with suppliers

regarding its future requirements.

Restructuring efforts seem to be paying

off. In the USA, Elementis’ sales increased

by 7% over the previous year with higher

pricing being the main driver of the

improvement. Otherwise volumes were

lower in the chromic acid market due to

changes in the CCA market for timber

treatment at the beginning of 2005.

The company is now almost out of the

market for sulphate which it considers

a simple commodty product. In 2006,

approximately 31% of its sales were

chromic acid, 35% were chromic oxide,

24% were merchant dichromate and the

balance chrome sulphate. Geographically,

47% of sales were in North America, 26%

in Europe, 11% in Japan and the balance to

the rest of the world.

In the UK sales also increased by 7%

over the previous year after adjusting for

the effects of the plant closure. Metal

oxide volumes were down by around 10%

due to increases in price implemented in

2005, but sales of first pass oxide to the

southern European ceramics market were

up on higher demand.

In another major development in

the industry, Lanxess completed the

acquisition of Dow Group’s 50% stake in

Chrome International South Africa (CISA),

the only producer of chrome chemicals in

South Africa late last year. The plant now

operates under the name Lanxess CISA

(Pty) Ltd.

CISA was established in the mid-1990s.

Its 2005 sales were equivalent to about

€40m.. The plant, which came on stream

in 1999, produces 70,000 tpa of sodium

dichromate. This chemical compound is

used mainly in the production of tanning

materials for leather.

Refractories – downward trend

A range of refractory grades are produced,

for use in the production of magnesiachrome

bricks and other refractory

products. Silica content is low, and a variety

of specially-sized products are available.

Demand in the refractories industry has

been on a downward trend mainly because

health hazards associated with hexavalent

chrome and changes in steelmaking

technology, namely the move from open

hearth furnaces.

Still, a fairly solid market remains

chiefly in the production of mag-chrome

bricks. Specific quantities of variously

sized particles together with magnesite are

blended prior to pressing into refractory

shapes to meet application requirements.

These refractory shapes may be bonded

chemically (unburned), burned, or fusion

cast.

At the 5th International Symposium on

Refractories organised by the Chinese

Society of Metals in Beijing 11-12 April,

2007, a number of papers presented

the case for chromite refractories. In a

presentation entitled “Characteristics

and problems of chrome containing

refractories”, Akira Yamaguchi of the

Okayama Ceramics Research Foundation,

Japan, clarified the conditions of hexavalent

chromium compounds and the conditions

for suppressing the formation of these

compounds. “Cr2O3 has characteristics that

make it an excellent refractory material.

The major drawback is that noxious

hexavalent chromium is easily formed”.

Outlook

With growth in China’s stainless steel

industry forecast to continue at a brisk

pace, it looks unlikely that demand for

ferrochrome and chromite will drop off

anytime soon.

As one commentator put it: “The market

outlook remains volatile. Non-met prices

are driven upwards by China and also

driven by the higher ferrochrome prices. If

demand from China calms down, we will

see a correction to more realistic levels.”

Until more supply comes onto the

market, consumers of non-metallurgical

chromite can expect continuing tightness

in supply and rising prices.

deficit, working wonders for

deficit, working wonders for