Source: Chrome miners raise alarm | The Financial Gazette June 8, 2017
ZIMBABWE’s small-scale miners have criticised the country’s chrome pricing regime, saying it had priced them out of the market by failing to move in sympathy with international price adjustments.
Chrome prices in the country are determined by government through a chrome buying unit, Applebridge, to which small scale chrome miners sell their produce. The metal is however marketed by the Minerals Marketing Corporation (MMCZ).
Applebridge was created by government last year as a special purpose vehicle to purchase the metal from small scale miners.
In a research paper submitted to the Ministry of Mines and Mining Development three weeks ago, the Confederation of Zimbabwe Small Scale Chrome Miners (CZSSCM) said globally, chrome prices had declined in the past year.
However, the CZSSCM paper said chrome from Zimbabwean producers had been priced at the levels that prevailed prior to December 2016 when the prices softened.
As a result, Zimbabwean chrome was becoming uncompetitive.
CZSSCM said global importers had begun to shun chrome from Zimbabwe, preferring to buy from the markets that have reviewed prices downwards.
The report said 44 percent of chrome from Zimbabwe was priced at US$175 per tonne, against a buying price of US$200 per tonne in China, which consumes the bulk of chrome from Zimbabwe.
When the cost of logistics, said to be between US$60 and US$70 per tonne, is added, Zimbabwean chrome is priced out of the Chinese market.
In other markets, chrome prices declined from a high of US$160 per tonne about a year ago, to between US$80 and US$100 per tonne.
The CZSSCM said government should direct the MMCZ and Applebridge to review prices down so that Zimbabwean chrome remains competitively priced.
“A clear example is the current situation where global chrome prices have greatly fallen since December 2016,” CZSSCM said in the seven-page paper.
“Despite the price drop, MMCZ/Applebridge continues to hold a uniform price that is far higher than the market price. Currently, MMCZ has decided to hold prices at levels that far exceed the market prices. This has caused a halt to international trade with Zimbabwe,” said CZSSCM.
The country’s chrome mines were beginning to chart a new path after government in 2016 lifted an export ban imposed in 2011, as government tried to reorganise the sector in order to get a fair share of revenue from chrome exports.
The ban, effected by former mines minister Obert Mpofu, had grounded the industry. Since the ban was lifted, chrome output has been rising. Last year, it shot up 27 percent to 285 000 tonnes, from 208 000 tonnes in 2015, according to the Chamber of Mines of Zimbabwe (CoMZ).
The CoMZ projects that chrome output could reach 375 000 tonnes this year, riding on tailwinds of rising commodity prices.
“We…are being negatively impacted by the current pricing structure adopted by MMCZ/Applebridge. The pricing structure is harmful and halting export sales. We are requesting…that an immediate review be conducted and moving forward the uniform price must be aligned with global chrome ore market prices,” the small scale chrome miners’ report added.
“When approached by CZSSCM to notify them of the pricing issue MMCZ/Applebridge (said we must) wait and not to make further pricing corrections… In other words they would rather earn zero tax revenue for Zimbabwe and zero sales for the small scale miner for the next six months to a year, while hoping the prices will rise to 2016 December prices caused by chrome inventory shortages.”
The small scale chrome producers are pressing government to align the mineral’s price to the market, saying the fixed price was hurting their operations.
“Halting trade by refusing to acknowledge market forces has affected the Zimbabwean small scale miner. Therefore, ex-mine prices should be calculated within the range of US$65 and US$85 for buyers to cover distribution and margin costs,” they said.
“As prices improve, we will revert upward on price along with the market. This action will serve to attract the 300 to 400 buyers required to re-establish the Zimbabwe chrome market.”
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