The International Chromium Development Association (ICDA) will conclude its 40th anniversary in Cape Town in November. Project Blue is excited to partner with the ICDA for the event and engage in discussions about the current state of the South African chrome ore and ferrochrome industry.

South Africa is the world’s largest producer of chrome ores, and the country saw a significant 27% y-on-y increase in exports during the first half of 2024. This growth aligns with a 30% y-on-y increase in Chinese ferrochrome production during the same period. Chromium in South Africa is extracted from chromatite seams in the Bushveld Igneous Complex and can be broadly split into primary mines (LG & MG seams) and platinum group metal (PGM) by-product mines (mainly the UG2 seam, though some MG seams increasingly adding PGM co-production). The UG2 chromite has captured growing market shares as a low-cost ore and ferrochrome smelters have adjusted processing technology over the last three decades to accommodate growing volumes of chromite fines.

South Africa, as the premier supplier of PGMs, has offered a steady flow of UG2 tailings to chromium recovery plants, as well as some better-kept historical tailings being processed. Project Blue will be visiting the ChromTech facility in the heart of PGM mining during our inaugural Ferroalloys Critical Materials Conference on 9 September 2024, where we will discuss the synergies between the chromium and PGM industries.

The outlook for PGMs has faced challenging headwinds as the automotive industry ramps up its electrification. In the second half of 2022, PGM basket prices began to decline, bottoming out in the second half of 2023 with platinum and palladium prices both hovering around the US$1,000/oz mark.

In contrast, chrome concentrate prices began to rise over the same period as Chinese port stocks continued to deplete with a resurgence in ferrochrome production growth. Despite restocking efforts in the fourth quarter of 2023, record ferrochrome production continued to reduce China’s port stocks and together with logistic constraints in South Africa have kept ore prices above its typical cost base for a record period. We will be visiting the Durban port next month as part of the Ferroalloys Critical Materials Conference in September in collaboration with Connect Logistics, where we will observe innovative mine-to-market solutions, as designed rail capacity to Richards Bay has struggled to keep pace. With ferrochrome production in China forecast to grow with its stainless-steel industry, chromium exports will need to keep rising and South Africa is best placed to offer abundant ores. However, how will the future of PGMs impact the supply landscape?

Financial losses among many PGM producers in the Eastern Bushveld have led to projects being placed on hold as producers began incurring financial losses. In FY 2023, major companies such as Anglo Platinum and Sibanye Stillwater reported profit declines of approximately 71% and 46%, respectively. Sibanye faced significant pressure due to the low PGM prices, leading to a US$2.6Bn write-down of assets. The company was forced to implement major restructuring efforts, including the closure, or downsizing of loss-making shafts. At Marikana, the Rowland and Siphumelele shafts were repositioned to lower-cost operations, while the 4B shaft continued operating under strict financial conditions, with the possibility of closure if losses persisted. The Simunye shaft at Kroondal was closed, reflecting the company's broader strategy to shut down unprofitable operations to sustain the rest of its PGM business. The company has since focused on sustaining its South African operations by reducing costs and improving efficiency. However, further restructuring and potential shaft closures remain on the table if profitability cannot be maintained. Sibanye has also reduced its workforce by 14%, which includes layoffs and natural attrition, to adapt to the new market realities.

The chrome retreatment facilities at the Kroondal and Marikana shafts contribute to 17% of South Africa's UG2 chrome production. Additionally, operations at Anglo Platinum and Implats combined account for a further 12% of production. If the PGM market continues to suffer financial woes, there is a likelihood of considering the restructuring of these assets once again. Project Blue estimates that at least 17% of South African supply is at risk of being removed from the market.