Bruce speaks out https://resourceinvestingnews.com/50233-india-pulls-a-china-on-the-chromite-market.html
India may be the next country to “pull a China,” by curbing exports on steel making metals. If it goes through with its plan, there will be big implications for the chromite market.
“Pulling a China”
Following similar path, last week the Indian government released a draft of its National Steel Policy 2012, which outlines several important policy directions for the nation’s steel sector.
The government expects Indian steel demand to soar from just under 70.92 million metric tons (MT) currently to as much as 233 million MT in the 2025 to 2026 fiscal year. That amounts to a staggering 228-percent increase.
India wants domestic steel producers to ramp up to meet this demand. The government is projecting a 239-percent rise in nationwide steel output, hoping that the country will produce 300 million MT by 2025 to 2026.
Keeping metals at home
To feed the growing local steel industry, the Indian government wants to keep steelmaking metals in the country.
Iron ore is obviously a focus. The new steel policy notes that exporting Indian iron ore may leave local steelmakers with less supply, forcing them to rely on more expensive imports.
The policy therefore suggests that domestic iron users get first rights to Indian iron ore supplies. The Ministry of Steel has even proposed creating a special inter-ministerial committee aimed at studying ways to reduce iron ore exports.
But the government is eyeing more than just iron ore. The new policy also identifies chromite and manganese — critical steel additives — as metals that India should keep in reserve.
The policy notes that “with increasing exports witnessed in the recent years there is an urgent need to conserve these resources for future domestic value-addition and use in the Indian steel sector.”
The document concludes that “restraining exports” of these metals is a priority for the future.
A key chromite player
Changes in Indian export guidelines would be critical to the global chromite sector.
The nation is the second-largest chromite producer on the planet, with its annual production totaling 3.8 million MT, according to the United States Geological Survey (USGS).
Much of this output is used domestically, but India still exported a significant 400,000 MT in the last fiscal year. That’s equivalent to one year of annual demand in the United States.
But it appears that even without pressure from the new steel policy, India’s chromite exports are already being choked. The Minerals and Metals Trading Corporation of India (MMTC) reported this past September that it expects chromite exports to fall 17.5 percent, to 330,000 MT, in the coming fiscal year, according to Business Standard.
The MMTC is the only agency in the country licensed to export chromite.
But officials from the agency also doubt that India can use all of its chromite production in the country. They note that the nation lacks the electricity capacity needed to upgrade all of its chromite into end-usable ferrochrome.
“India cannot consume all the chromite mined in the country for ferrochrome making, as a huge amount of electricity is needed for the conversion, which is very expensive. We have to export the material,” said P.K. Das, chief general manager of MMTC.
Potential implications
But any Indian export cuts could leave the chromite market in the lurch. That is particularly true in the case of China — consumer of 80 percent of the world’s traded chromite and the majority of Indian exports — which may begin looking elsewhere in the world for sources of supply.
But new chromite projects are not easy to come by. The world’s other significant suppliers are South Africa and Kazakhstan, neither of which are currently stellar locations for developing new mining works.
Nor are there a lot of projects that offer easy shipping access to China, as India does. That means Chinese buyers may have to look further afield to avert a supply crunch.
That could be good news for a number of emerging chromite project areas.
One area of significant chromite activity is Northern Ontario’s Ring of Fire area. The region got a big vote of confidence in 2009 when major iron ore producer Cliffs Natural Resources (NYSE:CLF) purchased 100 percent of the Black Thor chromite project by buying Freewest Resources.
Black Thor is now in the environmental permitting stage. Cliffs may produce up to 2.3 million MT of chromite concentrate there yearly, making it a significant global source. The Black Thor development is also expected to include an upgrading facility to produce high-value ferrochrome, which raises the question of how much of this supply will be available for export.
Cliffs’ development could be the underpinning for a new chromite district. Several junior companies in the same Ring of Fire trend, including KWG Resources (TSXV:KWG), Noront Resources (TSXV:NOT) and Probe Mines (TSXV:PRB), have also identified significant chromite resources.
“There are no significant chromite mines in the western hemisphere right now,” Bruce Hodgman, communications director for KWG Resources, told Chromium Investing News.
Hodgman identified the high-grade nature of the Ring of Fire chromite ores, as well as Ontario’s access to cheap power, as major advantages. “Asian markets would likely be the main buyers,” he said.
The Albanian option
Albania is an intriguing frontier for the chromite industry and has a rich history in the sector.
The nation was amongst the top three producers of chromite as recently as the 1980s, producing over 900,000 MT of chromite in 1989, according to USGS data.
But the break up of the Soviet Union sent Albanian production into a tailspin. By 1999, chromite output had slumped to less than 100,000 MT yearly.
That’s now changing. By 2008, the developing economy helped Albania put out almost 204,000 MT annually.
The nation is little out of the way for most western producers. However, Columbus Copper (TSXV:CCU) has secured a land package that covers one of the nation’s most prolific past-producing chromite districts: the Bulqiza and Batra mines. They were responsible for some 80 percent of Albanian chromite production during the heyday of the 1980s.
After an ownership dispute with the government, Columbus regained full control of the Albanian project in November. Perhaps that is just in time if this past producer can be ramped up to take advantage of the tightening global market.
Securities Disclosure: I, Dave Forest, do not hold equity interest in any companies mentioned in this article.
Related reading:
Kazakhstan Needs to Cut Investment Barriers to Boost Mining
South Africa Leads World in Chromium, but China Fears Growing
South Africa Eyes Potash-like Chrome Exchange
India Calls for Total Ban of Chrome Ore as Worries of Depleting Reserves Mount
Tapping Into the Vast Potential of Ontario’s Ring of Fire