Lobby group Save SA Smelters has urged government to act with urgency in implementing the raw chrome ore export tax.

Cabinet on October 22 released a statement in which it said it approved of measures to support the domestic ferrochrome industry, including through an export tax on chrome ore.

Save SA Smelters says 80 000 more jobs are on the line if government does not make good on its own procurement promises, by implementing the tax.

The group believes the Chinese and Indonesian markets are growing and will dominate demand for ore and ferrochrome in future.

“If the price disparity between China and the West is allowed to continue, there will be no South African smelting industry left.

“Just last year, the Lydenburg and Meyerton smelters shut their doors, with more to come should government fail to act on this crisis in the sector.”

Before 2012, South Africa was the biggest producer of ferrochrome and currently has 80% of the world’s chrome raw material. Save SA Smelters says it is the lack of imposing tax on the export of chrome ore that causes smelters to close down.

CHROMESA'S VIEW

Meanwhile, producer representative group ChromeSA expressed its disappointment at the Competition Commission’s decision to decline the group’s exemption application.

The application was lodged nine months ago to secure an urgent dispensation for ChromeSA to engage in discussions around potential support mechanisms that could be of assistance to the South African ferrochrome industry.

The group says such a tax would have a destructive impact on primary and upper group two (UG2) chrome ore producers, given that they sell the bulk of their production for export.

The group also believes that increased sales into the domestic chrome market are unlikely to realise, given that there is an excess of chrome supply as it stands.

ChromeSA also states that South Africa’s rising electricity prices will erode any potential benefit gained from the tax within a few years.

The group remains committed to developing alternative solutions to the proposed tax, summarising its view that the proposed tax aims to boost one industry, or one part of the value chain, at the expense of another, with “flawed justification”.

ChromeSA says that, although it appreciates the difficulties facing the ferrochrome industry and is not necessarily against the implementation of export taxes, the proposed chrome export taxes poses too many downsides for chrome producers.

The chrome mining representative group does not believe South African chrome ore producers have sufficient market power to increase the chrome ore price without losing market share in the export market.

China might also draft a retaliatory trade policy aimed at South Africa, it warns.

A study the group had asked Genesis Analytics to undertake last year had found that 22% to 32% of South Africa’s current supply to China may be vulnerable to displacement.

The chrome ore will become less competitive in terms of cost and price, while international chrome ore producers can simply increase production and displace South African chrome ore, ChromeSA notes.

Chrome ore production has grown by 50% over the last five years and close to 60% of all chrome ore is exported, with most of these exports going to China.

South Africa exports about 13.6-million tonnes of chrome ore a year, from a total production of 22.7-million tonnes, with the chrome mining industry employing about 22 904 people, of whom just under half are employed by nonintegrated chrome producers, alongside integrated producers and UG2 producers of chrome.