It has been a challenging three years for the South African mining sector, particularly for ferroalloy producers. Several producers have reduced their output, while others have either entered business rescue or have been forced to close completely, says metals, minerals, carbon and chemicals research consultancy Roskill Information Services African research manager Jack Bedder.

Despite a tough start in 2016, he notes, signs for this year are positive for the vanadium, chrome and manganese markets. South Africa is the world’s leading producer of chromite and manganese, and more than 10% of the world’s vanadium production comes from the country’s Bushveld Igneous Complex, in Limpopo.

Bedder highlights that, for the South African vanadium market, the 2015 closure of the Gauteng-based Evraz Highveld Steel & Vanadium, the South African subsidiary of the world’s leading supplier of steel and vanadium, Evraz, was the most significant supply-side development in the sector in recent years. In 2014, South Africa accounted for about 20% of global vanadium feedstock production, but this figure dropped to below 10% in 2016, following the closure.

“It remains to be seen if South Africa can remain a dominant force in the vanadium market, but there are certainly opportunities in the vanadium space.”

He notes that diversified miner Glencore’s Rhovan mine and plant, in Brits, in the North West, remain in operation and there are some projects developing in the country, such as diversified miners Ironveld’s and Bushveld Minerals’ Limpopo vanadium projects.

“Most market participants expect prices to continue to improve over 2017, forecasting a steady growth rate in vanadium demand from the steel sector, but feedstock availability is expected to remain tight.”

Bedder adds that the buzz around vanadium-redox batteries (VRBs) is also set to continue.

In August, Mining Weekly reported that Canadian firm Sparton Resources had bought a group of inactive VRB manufacturers for $3.3-million. The Toronto-headquartered company’s subsidiary, VanSpar Mining, signed an agreement to acquire all the shares of Cayman Islands corporation JD Holding (JDH), the parent company of the group of inactive companies.

Sparton advised that large-scale energy storage was essential for enabling governments to achieve their targets for increased renewable-energy use and reduced carbon emissions. Demand for energy storage has grown at a compound average growth rate of 38% since 2011, and VRBs are expected to be a large component of new projects, says Bedder.

The former JDH companies have, to date, installed batteries in 12 different countries and accumulated more than 800 000 hours of testing and quality assurance development.

Chrome
Bedder highlights that there have been “some interesting developments” in the chrome market in recent months, after prices reached six-year lows in the first quarter of 2016 and several ferrochrome operations, which were struggling without a stable ore supply, closed down.

“However, the price recovery in the second half of 2016, driven by Chinese demand for South African ore, has seen chrome ore and ferrochrome prices recover to their highest levels since the global financial crisis.”

He explains that a series of takeovers and price recovery have also started to consolidate and revive the South African sector, as bigger producers have acquired the assets of smaller, struggling operations. Mineral services provider Traxys acquired carbon ferrochrome producer Tata Steel’s KwaZulu-Natal ferrochrome plant; steel producer ASA Metals accepted an offer from chrome producer Samancor’s subsidiary, Tubatse Ferrochrome, and Samancor Chrome restarted production at the plant formerly owned by ferrochrome producer International Ferro Metals, after acquiring the operation earlier in the year. More consolidation could occur over the coming months, states Bedder.

“We expect ferrochrome prices to remain strong in the first half of 2017. Thereafter, higher prices should incentivise greater ferrochrome production from currently unused capacity worldwide. The market [might be] . . . in oversupply, which will eventually drive prices down. This will relieve demand for chrome ore and, subsequently, lead to lower chrome ore prices.”

Manganese
Bedder notes that 2016 also started with manganese prices at considerable lows; South African ore producers adjusted to lower demand by idling about three-million tons of capacity.

Prices started to recover in late July, surging in the second half of the year on the back of higher demand from China and export restrictions, owing to State-owned freight logistics provider Transnet’s tippler loading constraints in Port Elizabeth.

“The South African manganese sector will probably not face new challenges in 2017. Energy prices, which will likely see double-digit percentage increases in rand terms, will be a factor and could eventually put pressure on ferroalloys producers. It is not clear whether higher energy coal prices, or possible higher oil prices, will mean even higher electricity prices.”

He adds that, owing to State-owned power utility Eskom’s infrastructure and electricity generation struggles, energy availability will remain a factor, while it remains to be seen how Transnet will resolve the issue of transporting sufficient bulk commodities out of Port Elizabeth.

“The performance of the rand will also be an important factor. However, with chrome, manganese and vanadium prices ending 2016 on a strong note, there is cause to be optimistic in 2017.”

Roskill Information Services will exhibit at this year’s Investing in African Mining Indaba, which will be held at the Cape Town International Convention Centre from February 6 to 9. Bedder stresses that the event provides an ideal opportunity to publicise the skills and opportunities available in Africa’s mining sector. “For us, however, it’s all about meeting new people from South Africa and other countries across the continent.”