[The Communist Chinese are crawling around Zimbabwe. Jan]

With ferrochrome prices on the rise a Chinese consortium is set to construct a multi-billion-dollar high-carbon ferrochrome smelting plant in Selous, about 80km west of Harare, to become one of the biggest ferrochrome processors in the country.

China has a voracious appetite for mineral resources because of its rapid industrialization, but the company is also coming in on a developing price boom in the mineral.

The Chinese Zimbabwe project is expected to be complete by 2008. The smelter will be opened in phases and is expected to create more that 500 jobs.

It has been okayed by the Export Processing Zones Authority (EPZA).

The group has access to substantial chrome ore reserves in Mutorashanga and Shurugwi.

Construction of basic infrastructure such as electricity and road networks are underway and the company is expected to create more than 500 jobs in Chegutu, Selous and Norton.

It has been granted a five-year tax holiday and to bring in outside technical expertise for the construction of the furnaces.

In 2003 the price rise began with the industry registering a 10 percent growth, thanks mainly to the strong recovery in the global ferrochrome prices from the slump of the 1990s. The surge is likely to be sustained for the next four years. Charge chrome, the most popular grade, was fetching between US$0.68 and US$0.69 a pound on European markets and between US$0.72 and US$0.73 a pound in the US, which takes 10 percent of world production.

Ferro-chrome prices reached their highest levels for ten years in early 2005, at US cents 72-74/lb. This represents a significant recovery from early 2002 when prices of US cents 27-29/lb were at their lowest level for 30 years and some 1.3 million tons per year ferro-chrome capacity was lying idle.

Recovery in the ferro-chrome market has been primarily due to growth in stainless steel production, which is forecast to maintain strong growth through the mid-2000s, led by Asian demand.

Chinese output is estimated to rise from 1.8m tons in 2003 to at least 6m tons in 2008, with growth concentrated in the next two to three years.

The recent high prices and these expectations have encouraged plans for significant capacity expansion.

Over the next five years there an upturn in the aerospace and industrial gas turbine markets is expected. Consumption is estimated to have risen by 15% in 2004, and could increase by a further 25% to 25,000 tons per year in the late 2000s.

Integration

The cyclical nature of the ferro-chrome market has resulted in a high degree of vertical integration between chromite mining and ferro-chrome production, and concentration of production among relatively few countries and producers, say analysts. The increasing vertical integration has put severe pressure on non-integrated producers in times of low ferro-chrome prices.

The formation of a joint venture between the two largest chrome producing countries, South Africa and Kazakhstan, and their companies Xstrata Alloys and SA Chrome in early 2004 created the world”s largest ferro-chrome producer.

The Xstrata-SA Chrome Venture, Samancor Chrome of South Africa, and Kazkrom of Kazakhstan are the leading producers of chromite and ferro-chrome, accounting for nearly 55% of world output of both products.

The countries with the greatest potential to increase production are South Africa and Kazakhstan, thereby leading to further concentration of the chromite and ferro-chrome supply. The largest expansion planned by the Xstrata-SA Chrome Venture, could potentially increase total ferro-chrome capacity to 2.55Mtpy by the end of 2010.

The highly cyclical nature of the ferro-chrome industry, with prices dropping to very low levels, has led to two significant industry trends: consolidation among integrated producers and expansions through process improvements.

Source: AllAfrica.Com
URL: http://allafrica.com/stories/200507060584.htm…br>