JSE-listed Merafe Resources “remains excited” about the industry as its mix of energy efficient technology and the recent addition of Lion II allows the ferrochrome producer to capitalise on projected growth in ferrochrome demand.

CEO Zanele Matlala advised in a conference call last week that global stainless steel production was expected to grow in excess of 5% in 2015 and 2016, while the demand for ferrochrome could increase by 5% and 8% in 2015 and 2016 respectively.

She noted that, with the Glencore Merafe Chrome Venture – which owned and operated a number of chromite mines and 22 ferrochrome furnaces with a combined installed capacity of 2.34-million tons of ferrochrome a year – positioned as the lowest cost producer in South Africa, Merafe was well placed to withstand difficult global market conditions.

Merafe explained that global ferrochrome demand continued to rise, reaching 11.3- million tonnes for the year, up from the 10.2- million tonnes in 2013.

Chinese ferrochrome consumption increased by 11% year-on-year, while global ferrochrome production increased by 9% to 11.3-million tonnes on 2013.

“The bulk of this increase came from China and South Africa, which expanded output by 10% and 13% respectively,” the company said, adding that it was estimated that China accounted for 52% and 36% of the world’s stainless steel and ferrochrome production respectively. Chinese production had increased by 12% year-on-year, while higher production levels were also achieved in India and the US.

With regard to China overtaking South Africa as the top ferrochrome producer in the world, Matlala advised Mining Weekly in a telephone interview that the country was in a position to regain its spot.

“In time, products will always move back to their natural place. We have seen Japan producing ferrochrome, which doesn’t make sense because, for every ton of ferrochrome produced, they have to import 2.5 t to 3 t of chrome ore, [and] should shipping rates increase, it changes the game for them.”

The company reported a 3% increase in revenue from its Glencore joint venture (JV) for the year ended December, compared with the prior financial year, primarily owing to the 13% weakening of the rand:dollar exchange rate and the ramp-up of the Lion II project, in Steelpoort, Limpopo.

The Lion II project had come in at 7% above budget after the settlement of all outstanding contractor time extension claims, which Matlala said was notable considering that the budget for Lion II was drawn up in 2011.