south africa’s position in the global ferroalloy...
TRANSCRIPT
South Africa’s position in the
global ferroalloy industry
Kevin Fowkes
Ferroalloy Industry ConsultantFerroalloy Industry Consultantwww.kevinfowkes.com
29th September, 2010
PRETORIAJOHANNESBURG
South Africa has an extensive industry for both
mining and smelting ferroalloy products
Eastern
Chrome Belt
Western
Chrome Belt
Manganese mining
Chrome mining
FeCr smelting
Mn alloy smelting
www.kevinfowkes.com
DURBAN
CAPETOWN
Richards Bay
Port Elizabeth /
Coega
Kalahari
Manganese
Fields
Mn alloy smelting
FeSi smelting
Si-metal smelting
South Africa as a percentage of global output, 2008-10
South Africa is a leading player in the Cr and Mn
sectors, but only a minor player in Si and FeSi
Cr ore
FeCr 38 – 42%
35 – 39%
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Si metal
FeSi
Mn ore
Mn alloys
2008
2009
2010e
4 – 8%
18 – 25%
1%
3%
Global ranking of top-70 ferroalloy companies by ferroalloy revenues
(estimate for financial year ending 2010)
South Africa’s ferroalloy production is
dominated by major industry players
BH
P B
illi
ton
3
Company with ferroalloy
www.kevinfowkes.com
BH
P B
illi
ton
Xst
rata
Sin
ost
eel
Fer
roat
lanti
ca
Ass
man
g /
AR
MS
aman
cor
Chro
me
UM
K /
Tra
nsa
lloys
Her
nic
Tat
a S
teel
Inte
rnat
ional
Fer
ro M
etal
sR
uukki
0
bil
lio
n U
S$
Company with ferroalloy
production in South Africa
South African consumption vs exports of Cr and Mn products*
South Africa’s ferroalloy production is currently
export-focussed, with the exception of chrome ore
98% 38% 91% 76%
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FeCr Cr ore Mn alloys Mn ore
Exported
Consumed in South Africa
* estimated data for 2010
Present and future power availability is a major
constraint for South African ferroalloy producers
• Over the past decade, economic growth and development programmes have
significantly increased South Africa’s electricity consumption
• Generation capacity has not increased in line with demand, and the country
has reached the limit of its effective generation capacity
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• The ferroalloys industry has been hit by immediate limits on its power
consumption
• Power availability will remain constrained at least for the next 5-10 years,
making expansion of ferroalloy smelting in South Africa difficult
• Tight power availability has resulted in steep tariff increases. Tariffs are
expected to continue rising at 20-40% per year in the next 5 years
Average power price for South African ferroalloy plants:
Power tariffs for South African ferroalloy plants are
projected to more than double in the next 5 years...
100
120
140
MW
h
www.kevinfowkes.com
0
20
40
60
80
2006 2007 2008 2009 2010 2015 projection
US
$ p
er M
Wh
Global ranking of power tariffs in major ferroalloy producing countries:
... possibly causing South African power prices to
rank amongst the highest in the industry
2010
2015?
www.kevinfowkes.com
S.A
fric
a2010
Range of electricity consumption per tonne
of ferroalloy produced, South African plants:
Of the electricity used in South African
ferroalloy output, 75% is used to produce FeCr
Charge FeCrAvg 3700
HC FeMn1800 GWh
1200 GWh
1400 GWh
SiMn
Si / FeSi
Annual South African electricity
consumption per ferroalloy:
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2000 3000 4000 5000
SiMn
HC FeMn
kWh per tonne
Avg 2900
Avg 4300
FeCr13000 GWh
HC FeMn
Technology continues to reduce unit power consumption
in FeCr smelting. Conversions to FeMn possible
• Power consumption per tonne of FeCr produced in South Africa ranges from
2,400kWh/tonne to 4,200kWh/tonne
• The wide range reflects technology differences across plants
- eg. pelletising, pre-heating, pre-reduction
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• FeCr producers will continue to increase their use of these technologies to
reduce unit power consumption and enable increased use of UG2 ore
• Power constraints may also cause producers to switch from FeCr to less
electricity-intensive alloys (HC FeMn). Integrated South African production
is relatively lower cost for HC FeMn compared with FeCr. Assmang has
converted furnaces in 2010
South African FeCr producers are
increasing their use of UG2 ore
• South African FeCr smelters have become increasingly able to use cheap and
plentiful UG2 fines (by products from the platinum industry)
• This reflects more widespread installation of pelletising plants and a move
towards installing DC furnaces
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• Low Cr2O3 content of UG2 fines lowers content of FeCr. High percentage of
UG2 in ore mix can lower Cr content of FeCr below 50%. This may have
customer implications
• UG2 is more difficult and expensive to transport than higher-grade and
lumpy ores – nevertheless it is thought that UG2 is now being exported to
China
120
Global HC / charge FeCr production costs, estimated 2010:
South African FeCr production costs are now
middle-ranking on a global comparison...
Company with FeCr
production in South Africa
0
60
www.kevinfowkes.com
US
cen
ts p
er l
b
2000
Global HC FeMn production costs, estimated 2010:
... whilst South African HC FeMn production costs
remain amongst the lowest in the world
Company with HC FeMn
production in South Africa
0
1000
www.kevinfowkes.com
US
$ p
er t
on
ne
Percentage of world reserves in South Africa:
The world will need more units of chromium and
manganese to be mined in South Africa
37%
As much as 70-80% of
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24%
Cr Mn
Source: USGS
As much as 70-80% of
world RESOURCES of
these ores are thought to
be in South Africa
Chinese chrome ore imports by source:
South Africa now accounts for nearly half
of Chinese chrome ore imports...
5
6
7
8
Other
mil
lio
n t
on
nes
www.kevinfowkes.com
0
1
2
3
4
5
2004 2005 2006 2007 2008 2009
Other
Oman
Kazakhstan
India
Turkey
South Africa
mil
lio
n t
on
nes
Chinese manganese ore imports by source:
... and for around 25% of Chinese
manganese ore imports
4
5
Other
mil
lio
n t
on
nes
co
nta
ined
Mn
www.kevinfowkes.com
0
1
2
3
2004 2005 2006 2007 2008 2009
Other
Myanmar
Brazil
Gabon
Australia
South Africamil
lio
n t
on
nes
co
nta
ined
PRETORIA
JOHANNESBURG
Manganese ore exports from South Africa are
constrained by rail and port capacity
Kalahari
Manganese
Eastern
Chrome Belt
Western
Chrome Belt
JOHANNESBURG
www.kevinfowkes.com
DURBAN
CAPETOWN
Richards Bay
Port Elizabeth /
Coega
Manganese
Fields
Rail capacity
constraints
Port capacity
constraints
Manganese ore exports from South Africa are
constrained by rail and port capacity
• Manganese ore for export from the Kalahari mines travels to Port Elizabeth
down a rail line that is at full capacity
• The manganese export terminal at the port is also capacity constrained
• Short term, this is already leading to rationing of rail paths between
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• Short term, this is already leading to rationing of rail paths between
producers, with pressure from new mines coming on-stream
• Long term, both rail and port capacity will have to be expanded to enable
South Africa to meet growth in world demand for manganese ore
• Trucking to port is an option, but only borderline viable at current prices, and
not good for road congestion nor the environment
In conclusion...
• South Africa is a leading player in the global ferroalloy industry, especially in
the chrome and manganese sectors
• South Africa will need to be an even bigger player in these sectors in the
future, given its large percentage of world mine resources
www.kevinfowkes.com
• Power availability will be a significant constraint in terms of smelting
ferroalloys in South Africa in the next decade
• Rail and port capacity bottlenecks will continue to limit exports of
manganese ore without significant infrastructure investment
• Potential political objections to export of both chrome and manganese ores
• Heavy use of UG2 fines is a cost benefit but may have customer implications