Leadership reviews

Our strong balance sheet and the fact that our operations remain the lowest South African cost producer means that the Company is well positioned to take advantage when the market improves.

Chief Executive Officer | 17 March 2023


2022 has been characterised by a number of challenges and uncertainties. The Russia/Ukraine war contributed to the rise in global inflation and supply chain constraints. For the Venture, this led to unit production cost increasing by 30% from the prior year.

Subdued demand due to China's zero COVID-19 policy led to a decrease in ferrochrome sales volumes whilst logistics challenges contributed to decreased chrome ore sales volumes. Stronger realised prices and a weaker ZAR:USD exchange rate somewhat cushioned the impact.


The Venture was fatality free for the year 2022 and has remained so for the first two months of 2023. Our total recordable injury frequency rate improved by 14.29% to 2.40 (December 2021: 2.80*).

The safety of our employees is our number one priority and we therefore remain focused on the implementation of SafeWork 2.0 with the aim of continual improvement and the effective implementation of the fatal hazard protocols and safety standards.


COVID-19 continues to be a risk that we need to manage from a health perspective in the workplace and where controls must be implemented to manage the potential spread of the virus. The COVID-19 procedures have now been embedded at our operations as standard operating procedures.

On average a total of 10 023 antigen tests were conducted during 2022, in total 71 506 tests have been conducted on site since we started carrying out tests in January 2021. For the reporting period, 390 members of our workforce tested positive compared to 2 873 positive cases for the full year in 2021. Since the beginning of COVID-19 we have had 4 100 positive cases in total.

We supplied vaccinations at our operations until the end of April 2022. In total, 21 520 vaccines were administered, of which 4 438 were given in 2022.

As previously reported in our interim results, it is with great sadness that we lost two of our colleagues due to COVID-19 in 2022.

Financial review

We recorded a profit after tax of R1 410 million which is a decrease from the prior year. This performance is not quite reflective of challenges and uncertainties the business faced during the year under review.

Ferrochrome volumes sold were negatively impacted by subdued demand as a result of China's zero COVID-19 policy whilst chrome ore sales volumes were also impacted by logistics challenges.

Operational review

Merafe's attributable ferrochrome production increased marginally by 1% from 379kt to 384kt for the year ended 31 December 2022. This was despite the electricity supply challenges experienced particularly in the second half of the year.

Lydenburg smelter, Rustenburg furnace 6 and Waterval mine remain under care and maintenance.

Total unit cost of ferrochrome production rose by 30%. The increase was mainly driven by general inflation, higher market ore prices, reductant prices and electricity tariffs. Reductant costs were impacted by higher market cost of coke and anthracite. Inadequate local supply of reductants continues to be a challenge and as a result the Venture had to import at higher prices.

Electricity tariffs increased by 9.61% with effect from 1 April 2022. The National Energy Regulator of South Africa has approved a tariff increase of 18.65% with effect from 1 April 2023. The hike will certainly add more cost pressures. Reliability of electricity supply remains a serious concern. The Venture's operations were impacted by curtailments stage 3 and stage 4 having to reduce load. The Venture continues to pursue a Negotiated Pricing Agreement with Eskom to mitigate against the unsustainable high energy costs. In addition, the Venture is evaluating proposals for construction of renewable energy facilities.

Massive logistical challenges continue to plague the industry, contributing to increased logistic costs. The increased reliance on road transportation, combined with higher diesel costs has pushed this cost component higher.

Market review

Global ferrochrome supply increased by 6.7%1 year‑on‑year led by production growth in China. The increase in supply outweighed demand in stainless steel which contracted 3.5%1 year‑on‑year to 56.7Mt1. Stainless melt rates in China decreased by 1.6%1 to 32.9Mt1 as the zero COVID-19 policy affected production while high energy costs and weak demand stifled output in Europe as production decreased to 10.5%1.

High chrome ore consumption coupled with logistical constraints out of South Africa resulted in a significant drawdown of Chinese port stocks. Chrome ore pricing increased by 44%2 year‑on‑year.

The average European ferrochrome benchmark price was US cents 1813 per pound in 2022, which presents an increase of 19%3 from the 2021 average price.

Strategic review

Our strategy remains unchanged and we continue to focus on ferrochrome and chrome ore production and maximising cashflows from the Venture.

We continue to evaluate growth opportunities together with our Venture partner. Our investment in the PGMs plant in Western Chrome Mines is already paying off with revenue of R100 million for the year.


Global stainless steel production is expected to rebound in 2023, on the back of China abandoning the zero COVID-19 policy. This should lead to an increase in ferrochrome consumption.

The electricity supply challenges are set to continue this year and will have an impact on production.

Our focus for 2023 will still be on the efficiency of safety, operations, cost control and cash preservation.

I would like to thank the company staff and executives, the Board and Venture partner for their contribution to the solid set of results in a challenging environment.

Chief Executive Officer | 17 March 2023

* Restated
1 CRU commodity market analysts
2 Ferroalloynet
3 Fast Market (Metal Bulletin) – Ferrochrome lumpy Cr charge quarterly, basis 52% Cr (and high carbon), delivered, $c/lb Cr

Key market indicators

Global stainless steel production (mt)

Global ferrochrome demand (mt)

Global stainless steel production (%)

Global stainless steel production (%)

Global ferrochrome demand (%)

Global ferrochrome demand (%)

Global ferrochrome production (mt)

Global ferrochrome production (mt)

Chrome ore imports into China (mt)

Chrome ore imports into China (mt)


Note: The source of information in our operating context, and chief executive officers strategic review in this report is CRU. This market information is continually updated by CRU. Such updates may amend previous information or projections. To the extent that there is any significant or material change to information provided by CRU and used in this or previous reports then this will be stated.

UG2 merchant prices (USD/t)

UG2 merchant prices (USD/t)

European benchmark ferrochrome price (USc/lb)

European benchmark ferrochrome price (USc/lb)

Ferrochrome merchant prices 49%–70% (USc/lb)*

Ferrochrome merchant prices 49%–70% (USc/lb)*