South African lockdown blocks metals supply

A 21-day lockdown in South Africa will block metal exports from the country as ports minimise operations, allowing the movement only of essential goods.

Exports of chrome and manganese ore produced in South Africa and Zimbabwe, as well as cobalt hydroxide exports from the Democratic Republic of Congo (DRC) that is mainly transported through the Durban port, will be affecrted during the lockdown.

State-owned ports operator Transnet confirmed yesterday that it would be scaling back operations to essential services only, focused chiefly on agri-bulk products and medicines. The decision came after South Africa's transport minister, Fikile Mbalula, said that only essential goods would be processed at the eight seaports.

One cobalt trading firm that imports from the DRC said there was "no shipping available" for cobalt hydroxide out of South Africa and expects delays when the ports reopen.

The threat of a coronavirus outbreak in the DRC could also affect supply in the coming weeks, as Africa gets to grips with the global pandemic. Some trading companies could move material through Dar es Salaam in Tanzania as an alternative to Durban.

Under normal conditions, the complete shutdown of one of the major trade routes for cobalt hydroxide would have a drastic effect on prices, but prices were stable because of a build-up of stocks in China, lower refinery runs and shipments scheduled for February continue to arrive. Demand in Europe is expected to increase until at least after the summer months, when governments expect to have the outbreak under control.

Argus assessed 30pc cobalt hydroxide prices cif China as stable, at $9.80-10.60/lb, on 24 March.

Chrome, manganese mines shut for maintenance

Most chrome and manganese producers have halted mining and smelting operations following the government-imposed lockdown.

Under regular economic conditions, such a supply disruption would have a major consequence on ore prices, but Chinese ferro-chrome and ferro-manganese smelters are not operating at full capacity.

Yesterday, Argus assessed 40-42pc South African UG2 chrome ore prices as being up by 5.88pc to 26-28 yuan/mtu fca Chinese ports. Market participants anticipate a muted price reaction because current chrome ore stocks are expected to meet Chinese demand for the duration of the lockdown.

European demand is subdued because of the coronavirus outbreak. One European chrome ore importer estimates that global stocks are sufficient to cover about a quarter of world consumption.

India's similar 21-day lockdown announcement this week creates a more acute problem in the global ferro-chrome markets. India and South Africa are two of the largest high-carbon ferro-chrome producers in the world. An extended hiatus in both countries could raise prices despite reduced European demand.

Prices for 44-46pc manganese ore increased slightly by 1.25pc to Yn39-42/mtu fca Chinese ports. All other grades of manganese ore remained stable. Chinese manganese ore port stocks were at 4.73mn t on 18 March before the lockdown. The impact on port stocks will be measurable in a few weeks, given the lead time of 3-4 weeks between South Africa and China.

"Our operations are not considered essential services. Therefore, there will be a complete shutdown of our operations over the lockdown period. There will thus be no production over this period. We will continue to focus on ways to sustain our business in these difficult times," a spokesperson for Merafe Resources said. Merafe Resources' joint venture with Glencore is one of the largest chrome ore miners in the country.

Glencore-Merafe and a large European stainless steel buyer are negotiating the new quarterly charge chrome benchmark, but it is unclear whether the enforced lockdown will affect the price. Glencore yesterday also said it would place most of its South African ferro-alloy operations on care and maintenance.

The South African Minerals Council (SAMC), whose members include most large mining operations in the country, supported the government's decision.

"The industry is fully committed to working with the government to reach our common goal of preventing infection by Covid-19 and to minimise its spread. At the same time, we will seek to ensure that mining operations can start up in reasonable shape once the lockdown is over," SAMC chief executive Roger Baxter said.

By Thomas Kavanagh