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12 May 12 Coke unit depends on chrome tax – ArcelorMittal

Bloomberg quoted ArcelorMittal South Africa Limited said that the future of its coke and chemicals unit will hinge on the introduction of an export tax on chrome ore that would assist the country’s alloy producers.

Ms Nonkululeko Nyembezi-Heita CEO of ArcelorMittal said that South Africa is depending very much on the implementation of the proposed tax. Should the government decide against the duty, the steelmaker would have to rethink this whole business as it sells all its market coke locally.

Merafe Resources Limited said that local producers have asked for a tax of USD 100 per tonne to limit exports to China which is displacing local production. South Africa chrome ore exports to China increased 51% to about 4.7 million tonnes last year, while local ferrochrome output declined 9% to 3.28 million tonnes.

The Vanderbijl Park based steelmaker said that revenue from the unit dropped 16% in the quarter through March as a number of producers shut furnaces following electricity buyback agreements with state utility Eskom Holdings SOC Limited. Coke is a key ingredient used to produce ferrochrome from chrome ore.

Mr Mohamed Kharva an analyst at Nedgroup securities Limited said that “If the tax is not implemented it will be really bad for the ferrochrome producers and will put them under pressure.”

The steelmaker said that it expects substantially lower earnings in the quarter through June as domestic demand and prices retreat and costs increase. Profit will be lower due to a decline in domestic demand, softer steel prices, higher costs such as electricity and transport and a drop in sales of commercial coke due to the usual shutdown of the ferrochrome industry in the winter months.

Source – Bloomberg


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