Chromium’s primary use is in the production of ferrochrome alloy, which in turn is used to make stainless steel. Approximately 2 tonnes of chrome ore is consumed in order to produce 1 tonne of ferrochrome, while 1 tonne of ferrochrome is needed to produce 4 tonnes of stainless steel. Like nickel, chromium (and hence ferrochrome) prices are largely driven by the growth of the global stainless steel industry, which consumes over 90% of the world’s ferrochrome supply. Unlike nickel, however, there is no substitute for chromium in the stainless steel process.

Ferrochrome prices surged in the last several years, rising from about US $0.50 per pound in 2003 to over US $3.00 per pound in early 2008, an increase of approximately 43% year over year. Huge demand from the stainless steel industry, particularly from Asia, coupled with supply problems from main producers in South Africa were the driving forces behind these price changes. However, as a result of the 2008 global financial crisis, stainless demand began to weaken substantially in the second half of 2008 and into early 2009 and steelmakers around the world began to scale back production.  Ferrochrome prices consequently declined and a number of global producers have either scaled production back significantly or halted it altogether. As of January 2010, ferrochrome prices had risen back to US $1.00 per pound and production capacity had recovered to about 85% after reaching lows below 50% in the depth of the downturn. High-carbon ferrochrome traded above $1.50/lb near the end of Q2 2010.

The dominant player in the world ferrochrome market is South Africa, which accounted for 41% of global production in 2007. South Africa holds 74% of the world’s chrome ore reserves, followed by Zimbabwe (12%), Kazakhstan (8%), India (1%) and various other countries (5%).

Potential Ferrochrome Production in Ontario

During the course of 2008 and 2009, three high grade chromite ore zones were discovered in the McFaulds Lake area of Northern Ontario, Canada, including the Blackbird One and Blackbird Two deposits discovered by Noront Resources Ltd., the Black Thor and Black Label deposits discovered by Freewest Resources Canada Inc. (“Freewest”), now Cliffs Natural Resources (“Cliffs”) and the Big Daddy deposit discovered by a joint venture between Cliffs, Spider Resources Inc. and KWG Resources Inc. This string of deposits is believed to be part of a trend with a total strike length of 14 kilometres, running from Blackbird One to Black Thor. Results to date indicate that together, these deposits form one of the most significant chromite discoveries ever made in North America and compare favourably to some of the major deposits found worldwide. Grades range between 30% and 60% Cr2O3.

Cliffs Natural Resources, a NYSE-listed iron-ore and coal mining company, took over Freewest Resources in January 2010 for $250 million for its 40% share of the Big Daddy chromite deposit as well as Spider Resources for $125 million to acquire an additional 30% of Big Daddy. Cliffs has scheduled production to begin in 2015, mining 1-2 million tonnes of chromite ore annually and shipping it to Thunder Bay where it will be processed into ferrochrome. As a huge portion of the world’s chromite ore is produced in South Africa, it would appear that Cliffs is taking advantage of producing ferrochrome in a geopolitically safe region such as Ontario, with an abundance of reasonably priced power.