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Merafe calls for quotas as China takes the lead

Dineo Faku

MERAFE Resources would lobby the government to regulate the export of unprocessed chrome ore as part of a long-term plan to limit the amount of ore shipped to China, the company said yesterday.

China overtook South Africa as the world’s largest producer of ferrochrome, a key steel feedstock, in the first six months of this year, accounting for 33 percent of the 4.8 million tons produced globally, Merafe said.

South Africa has over 80 percent of the world’s chrome ore resources.

Merafe’s management would meet with officials from government departments later this month to propose a quota system to regulate the export of chrome ore, chief executive Zanele Matlala said at the presentation of first-half results.

“We have a meeting to present to government this month. We hope for a resolution by budget in February next year,” she said.

“We are not against the export of chrome ore, but we are saying to platinum producers we will take unprocessed ore, don’t send it to China.”

The company is leading the call by the ferrochrome industry for the government to introduce a $100 (R814) a ton levy on the export of unbeneficiated ore as part of a short-term intervention to protect local business against Chinese competition.

Last month, President Jacob Zuma said the trade pattern between China and South Africa was unsustainable.

For the six months to June, the company reported profit of R138 million, up from R86m in the comparative period last year. Revenue for the period decreased 7 percent to R1.23 billion and earnings a share climbed 57 percent.

The company expected global stainless steel production to grow by 4 percent this year and 5 percent annually in the long term, increasing the demand for ferrochrome.

It reported constrained production as an electricity buyback agreement with Eskom kicked in during the period. Ferrochrome output was at 123 900 tons, which was 15 percent lower than in the first half of last year.

The company closed seven furnaces, mostly in North West, from February to May this year, losing out on 130 000 tons of ferrochrome output. In return, Eskom bought back power that was not consumed by the furnaces.

Stephen Meintjes, a mining analyst at Imara SP Reid, said the results were unusual when seen against the downturn in the market, and Eskom’s need to reduce the power supply through its buyback project. “The second half will better reflect the underlying conditions of the sector,” Meintjes said.

Merafe is involved with Swiss firm Xstrata in the R1bn Lion II smelter project, which will add 360 000 tons a year of ferrochrome smelting capacity and is due to be completed in the second half of next year.

Its R190m Tswelopele project, a pelletising and sintering plant in Rustenburg to produce 600 000 tons a year, was expected to be completed later this year. The R66m Horizon mine development project would be completed in the first half of next year.

Merafe shares gained 1.2 percent to close at 82c. – Additional reporting by Reuters

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