I found this article on the web, when I was trying to see what the annual consumption of chromite is. It would appear that we are basically finding more of a resource, that while valuable, has limited usage. In fact, during 2008/09, many chromium suppliers shut down production due to low demand.

According to the article (below), annual sales for chromium chemicals are falling, partly due to environmental concerns. On the flip side, sale of chromium alloyed metals are rising, so the net effect is neutral. "World consumption of chromium metal increased by around 13% in 2008 to 40,000t, with demand for superalloys, the primary end-use market for chromium metal, driving the market."

My take is that there is a demand of about 40k tons per annum, but I think that is pretty low. Big Daddy and Black Thor have already provided Cliffs with a 100 year supply (according to their own press releases). At this point, Black Creek can add accessibility to the ore closer to the surface, but adding more of the metal to their huge stockpile is not very useful, even strategically - chromium demand is low enough that it is not a strategic asset/resource.

This could be the reason that we have not seen a competitor step up - there just isn't enough demand for the metal to make it worthwhile. Meanwhile, we have heard our CEOs state that nickel and other metals are going to be the reason for the infrastructure, not the chromium.

Cylinder

From www.mineweb.com, an article from 2009:

Double-digit falls in ferrochrome and chromite demand in 2009 - Roskill

The latest detailed report from Roskill Information Services predicts another bleak year for chromite and ferrochrome. Although it does suggest stainless steel output start to pick up in Q4.

Author: Lawrence Williams
Posted: Monday , 08 Jun 2009

LONDON -

UK-based metals analysis consultancy, Roskill Information Services has published its latest report on the chromium sector and predicts a bleak year price wise for chrome and for chrome alloys, even though it is reckoned that the stainless steel sector could start to recover by the fourth quarter.

Roskill comments that demand for chromite increased by an annual average rate of 4% for the period 2000 to 2008, with ferrochrome consumption increasing by the same amount. However, the onset of the economic downturn from mid 2008 has seen demand for chromium plummet, with prices following a similar path.

Ferrochrome consumption fell by 3.5% in 2008, in year-on-year terms, as major Asian and European consumers reduced orders to a minimum in an attempt to run down inventories, as demand from end-users declined sharply.

Export prices for ferrochrome have fallen by 68% for the ten months to May 2009, as demand from stainless steel, the main end-use for ferrochrome has collapsed. In response to weakening demand and falling prices producers have cut production, in some cases ceasing operations all together. Around 70% of world ferrochrome production capacity was suspended in the first quarter of 2009, with the Xstrata-Merafe joint venture operating at 20% of capacity since December 2008, while Samancor Chrome suspended all production in the first quarter of 2009.

With the sudden disintegration of end-user demand, the forecast is for demand for both ferrochrome and chromite to continue to fall in 2009. Demand for ferrochrome will fall by around 24% in 2009, year-on-year, on the back of the 3.55% fall in consumption in 2008. However, a recovery could begin to materialise from the fourth quarter this year, as the global economic situation begins to ease.

Stainless steel producers are the largest consumers of chromite, in the form of ferrochrome. The huge increases in stainless steel production in recent years has seen demand for both ferrochrome and chromite reach record highs.

Global stainless steel production has been driven in recent years by emerging markets, with China leading the way. Double-digit GDP growth of recent years has helped fuel China's growing demand for all commodities, with Chinese producers contributing some 80% of the increase in global stainless steel output since 2000.

However, stainless steel production fell in 2008 by around 7%, as producers attempted to respond quickly to weakening demand as a consequence of the global downturn. Production in 2009 will again fall, as producers cut output, with some operating at well below 50% capacity. On the back of these stringent production cuts, world stainless steel output is forecast to fall by 13% in 2009. However, the market could start to recover as early as the fourth quarter of this year, as a degree of restocking takes place in anticipation of a limited recovery in 2010.

Demand for chromium chemicals has declined in recent years, as environmental concerns have seen tightening legislation limits its use in the two main end-uses, leather tanning and metal finishing. Global demand peaked at around 1Mt (sodium dichromate equivalent) in 2001, falling by 32% to 680,000t in 2008.

Going forward, demand for chromium chemicals is predicted by Roskill to be modest at best, growing at an annual average rate of 2.5-3% over the next five years.

Strong growth in the aerospace industry in recent years has seen demand for chromium metal increase sharply. World consumption of chromium metal increased by around 13% in 2008 to 40,000t, with demand for superalloys, the primary end-use market for chromium metal, driving the market. Over the next few years, the global downturn will have a negative impact on this market, as the aerospace industry in the USA and Europe declines. The market for chromium metal will decline in 2010, with growth returning in 2011.

Ferrochrome prices were negotiated at US$0.69/lb in the second quarter of this year, almost 70% lower than the $2.13/lb peak set in July 2008. Prices for chromite have fallen by 73% to US$140/t from its US$520/t peak in July 2008, while prices for chromium chemicals and chromium metal have both fallen by almost 45%.

Given the weak outlook chromite and ferrochrome demand, Roskill forecasts prices to be much lower than those set in 2008. Ferrochrome prices are forecast to average US$0.77-0.80/lb this year, as end-use demand remains depressed. However, prices in the fourth quarter of 2009 could increase on the back some restocking. Chromite prices are likely to follow a similar pattern, with average prices for 2009 at US$135/t, with a potential 20-30% increase for 2010 as demand returns.

The full study is available at £2400 / US$5000 / €4000 from Roskill Information Services Ltd, Email: info@roskill.co.uk, www.roskill.com