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07 Mar 12 Merafe proposes a tax on chrome



Dineo Faku

South African ferrochrome producers wanted the government to impose an export tax of $100 (R753.80) a ton on chrome ore, Stuart Elliot, the chief executive of Merafe Resources, said yesterday.

Elliot said the tax would be passed on to end-use consumers of chrome ore in China and Taiwan, which take 40 percent of Merafe’s production.

“The importance of the export levy is twofold. First, it will reserve the chrome ore advantage and competitiveness of South African ferrochrome production. Second, it will ensure that chrome ore exports attract… maximum value for South Africa,” Elliot said.

South Africa holds 72 percent of the world’s ferrochrome reserves but it has been losing market share to China, which has no reserves of the mineral.

Deon Dryer, a managing director at Xstrata, said in Business Day on Monday that China had increased ferrochrome market share from less than 10 percent in 2001 to 35 percent because of ore from South Africa.

Elliot said: “As ferrochrome producers we have come together to seek an intervention in the national interest of South Africa to protect this mature chrome value chain and reverse the trend of de-industrialisation.”

He said the ferrochrome producers would approach the Department of Mineral Resources with the proposed tax.

Zingaphi Jakuja, the spokeswoman for the department, said that it was engaging with industry on the proposed tax but no official position had been decided on.

Last June, the department adopted a beneficiation strategy that identified commodities for value addition such as iron ore, chrome, manganese, nickel and vanadium. The strategy seeks to address the import parity pricing of iron ore and steel to support the final fabrication process. Local ferrochrome mining has an annual capacity of 5 million tons and employs 20 000 people directly, but only 70 percent was beneficiated due to exports of raw ore to China.

Merafe Resources is the biggest producer of ferrochrome in the world through a joint venture with Xstrata.

Last month, the Xstrata-Merafe joint venture announced that it would suspend five furnaces as Eskom was experiencing tight supply. The power utility would buy back power from the venture.

Elliot said 30 percent of the furnaces in the ferrechrome industry had been shut because of the electricity shortage.

However, Mike Schussler, the director at, said yesterday that South Africa should put the brakes on any plans to introduce export taxes on chrome ore until the challenges around power shortages were addressed.

“We do not have the electricity for benefication at present and Eskom is paying chrome exporters not to produce. Perhaps we should just say that until Eskom has enough electricity we should not have any export duties to encourage benefication,” he said.

Jabulani Sikhakhane, the Treasury spokesman, said changes to tax policy, or the introduction of new taxes, were announced in the Budget in February.

“However, the ferrochrome industry is free to engage with the Treasury on the proposal,” he said.

Local ferrochrome output declined 9 percent to 3.28 million tons in 2011, while Chinese production rose 13 percent to 2.5 million tons, according to data by market researcher Heinz H Pariser.

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