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08 Mar 2021 | 13:53 UTC — London
Highlights
Global stainless steel output seen recovering 12.5% in 2021
Prices improved in early 2021 on supply restrictions in China
London — South Africa miner Merafe Resources said ferrochrome demand as well as the recovery of stainless steel production hinges on how the COVID-19 pandemic develops, the company said March 8.
The Johannesburg-listed company said that the accessibility of vaccines as well as their distribution would support a recovery in global economies.
"Although there was negative growth of 5.0% in 2020 [according to CRU commodity market analysts], global stainless steel production is expected to recover with growth of 12.5% projected in 2021," the company said in a statement of its 2020 consolidated financial results.
"The supply restrictions in China, as well as the expected increase in demand, could have a positive impact on ferrochrome prices."
Merafe said electricity supply and pricing remain key risks for its business and the broader ferroalloy sectors.
"The electricity tariff increased by 8.8% effective April 1, 2020. For 2021, the National Electricity Regulator of South Africa has agreed to increase the tariff by 15.6%, following Eskom's High Court victory, where it challenged the inclusion of the government bailout of Rand 69 billion ($4.5 billion) in the calculation determining tariff increases," the company said.
"These increases add to cost pressures of the Venture's smelters and further reduce the cost competitiveness of the South African ferrochrome industry."
Merafe said global ferrochrome production in 2020 fell 11.2% year on year to 12.5 million mt, while South African ferrochrome production fell 25% due to pandemic-related shutdowns and other cost pressures that led to sustained lower production levels for the remainder of 2020.
The company said global stainless steel output was also hit heavily by the pandemic in the first and second quarters of 2020, though output recovered in the third quarter and hit a record volume of 14.2 million mt in the fourth, with full-year production down 5.0% year on year.
Merafe said global ferrochrome demand fell 5% year on year, while South African chrome ore exports fell 8.7% to 13.5 million mt.
"Despite a recovery in demand, ferrochrome and chrome ore remained in surplus during the second half of 2020 and prices were subdued over the period," the company said.
"Market prices have notably improved in early 2021 due to ferrochrome supply restrictions in China and further increases in global chrome unit demand."
The average European Benchmark ferrochrome price was 111 cents/lb in 2020, 1.1% higher than the 2019 average, it said.
Johannesburg-listed Merafe has a 20.5% stake in the Glencore-Merafe Chrome Venture in South Africa -- the world's largest ferrochrome producer -- with the rest held by Glencore.