CHROMIUM: WESTERN VULNERABILITIES AND OPTIONS

• Document Type: CREST
• Collection: General CIA Records
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• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 27
• Document Creation Date: December 21, 2016
• Document Release Date: January 15, 2008
• Sequence Number: 2
• Publication Date: February 1, 1983
• Content Type: REPORT

=) Intelligence
Chromium:
Western Vulnerabilities
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and Options
Not referred to DOI. Waiver
applies.
Confidential
GI 83-10019
February 1983
Copy4 J 1
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El ICF
Directorate of
Intelligence
IIU~~~.
Chromium:
Western Vulnerabilities
and Options
This assessment was prepared b
with a contribution from Office of
Global Issues. Comments and queries are welcome
and may be addressed to the Chief, Commodity Markets
Branch, Economics Division, OGI,
Confidential
GI 83-10019
February 1983
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Chromium:
Western Vulnerabilities
and Options
the Korean war.
? Albania might shift its political and economic partners for ideological
Key Judgments Chromium is irreplaceable in stainless steel; substitutes in tool steels,
Information available superalloys, catalysts, and other uses are more costly and less effective. In
as of 15 December 1982 the past, supplies from South Africa, the Soviet Union, Albania, and
was used in this report.
Zimbabwe have been readily available. Nevertheless, the high degree of
Organization for Economic Cooperation and Development (OECD)
dependence on these countries remains a source of concern:
? Southern Africa's severe economic, social, and political problems might
disrupt mining and transport activities in one or more countries of the re-
gion at any time.
? The USSR could embargo chromite exports to the West as it did during
reasons-as it has already done twice in the last 30 years.
We believe the likelihood of any of these events occurring is rather small.
Moreover, the OECD countries could do without chromium from southern
Africa, the Soviet Union, and Albania indefinitely without serious harm to
defense and critical civilian industries. Although the price of chromium
would rise substantially in the event of supply disruptions, this rise would
have little effect on consumers because chromium represents only a small
fraction of the total cost of its end products
In our judgment, a disruption of as long as six months could be easily man-
aged at this time by virtue of the large commercial stocks and unused
capacity created by the current recession among non-Communist world
producers outside southern Africa. With economic recovery, a short-term
loss of chromium supplies would require some conservation and substitu-
tion and greater recycling. Temporary government intervention and/or the
reduction in demand caused by higher prices would assure the allocation of
available chromium supplies to vital uses.
A long-term loss of supplies would require substantial changes in chromi-
um industries and end uses. The United States, for its part, could release
chromium from its strategic stockpile until such measures were
implemented:
? The OECD countries would expand exploitation of non-Communist
resources outside southern Africa, which now total over 500 million
tons-more than enough to satisfy their requirements for the rest of the
century. The United States could tap large, low-grade chromite resources
in several western states to meet most of its needs for 10 years or more.
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GI 83-10019
February 1983
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? New ferrochromium alloy facilities could be built in one or two years in
the industrialized West or in two or three years in undisrupted chromite-
producing less developed countries (LDCs) with technology now possessed
by West European and Japanese firms.
? One-third of current US chromium needs could be eliminated by
available substitutes, conservation, and recycling techniques; technologi-
cal developments over the next 10 years might do away with another 45
percent.
The Soviet Union would benefit from a disruption of chromium supplies
from southern Africa. After 1985 it might even be able to expand its own
exports to capture disrupted markets. It might do so selectively, however,
as a means of nurturing economic and political ties with key Western
countries. Large-scale exports during a prolonged disruption would in turn
serve to increase Western dependence on the East by discouraging the
development of alternative sources.
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Impact of Market Disruptions and Price Increases
Short-Run Disruption of Chromium Supplies
Long-Run Disruption of Chromium Supplies
Supply Alternatives
Technological Changes
Individual Country Responses
Major Chromite Producers: Potential for Disruption 1 1
Chromium Production and Consumption Statistics 15
Figures
1. Major OECD Ferrochromium Alloy Producers, Share of World
Output, 1960-80 1
2. US Potential Savings of Chromium-Containing Materials 6
3. Chromite Import Sources for Major OECD Users, 1978-81 8
4. Ferrochromium Alloy Import Sources for Major OECD Users, 1979 9
5. South Africa: Major Chromium Facilities 10
6. Zimbabwe: Major Chromium Facilities 13
7. Destination of Chromium Exports of Major Producing
Countries, 1979 14
1. Chromite Resources, 1981
2. Planned Expansion of Ferrochromium Alloy Capacity
A-1. Chromium Output of Key Producing Countries, 1980
B-1. Chromite Production and Apparent Consumption
B-2. Chromite Consumption, Production, and Capacity
B-3. Ferrochromium Alloy Consumption, Production, and Capacity
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A number of critical industries and consumers would
risk serious damage if chromium supplies were cut
off. More than 60 percent of OECD consumption is
related to metalurgical uses, the most important of
which is to give stainless steel its resistance to
oxidation and corrosion, especially at high tempera-
tures. Chromium is also added to tool steels and
superalloys to increase their strength, workability,
and wear. These steels have critical defense applica-
tions in airframes and jet engines. They also have
vital functions in food-processing equipment such as
holding and transport tanks, chemical and petro-
chemical processes where corrosive materials are
handled, medical instruments, and consumer dura-
bles such as automobile engines and catalytic con-
verters and household equipment and appliances
Chromium also has important chemical uses in metal
plating, leather tanning, water purification, pigments
for paints, and mud used in drilling oil and gas wells
and as a catalyst. In many of these applications,
substitutes are either unknown or more costly and
less effective. High-alumina chromite is used primar-
ily to make brick refractories for open hearth and
other types of furnaces. This use will decline as open
hearth furnaces are phased out of steel production.
Most chromium used in the manufacture of alloy
steels is in the form of various ferroalloys. The
chromite is smelted in a submerged-arc electric fur-
nace to produce charge chrome (50 to 60 percent
chromium), high-carbon ferrochromium (60 to 72
percent chromium), low-carbon ferrochromium (65 to
75 percent chromium), and ferrosilicochromium (35
to 41 percent chromium). The first two are generally
produced from cheaper high-iron ore, while low-
carbon ferrochromium requires the more expensive
high-chromium ore.
a The US Bureau of Mines estimates that the average annual
growth rate of world demand for chromium for the rest of the
century could be as low as 2 percent or as high as 4 percent. The
most likely level is placed at 3.3 percent (see US Bureau of Mines,
Chromium, Preprint From Bulletin 671, 1980). Other estimates are
lower: Malenbaum-3.0 percent (Wilfred Malenbaum, World De-
mand for Raw Materials in 1985 and 2000, New York: McGraw
Hill Inc., 1978); National Materials Advisory Board-2.3 percent
With the development of advanced processes for
producing stainless steel, the use of low-carbon fer-
rochromium and ferrosilicochromium has dropped
significantly over the past decade in favor of cheaper
charge chrome and high-carbon ferrochromium. This
has greatly benefited those countries with the lower
quality chromite deposits, particularly South Africa.
Chromium metal is also used for metallurgical pur-
poses but in much smaller quantities
Because stainless and other alloy steels account for
most chromium consumption, the cyclical and long-
run level of chromite demand is closely linked to
their production. We estimate that non-Communist
chromite consumption in 1981 was roughly 6 million
tons, almost 25 percent below its peak level in 1979.
The continuing severe world recession, particularly
the near-collapse of steel output in the industrial
countries, probably reduced consumption further in
1982. Consequently, there is now much slack capacity
among producers. US commercial stocks of chromite
equaled more than 75 percent of annual consumption
at the end of 1981. Although little information is
available, stocks in other industrial countries are
also believed to be high. Moreover, India, Finland,
Madagascar, Turkey, and Brazil by this time proba-
bly have large producer stocks and would welcome an
opportunity to reduce these without competition from
South Africa.
This situation will persist until economic activity in
the OECD countries picks up momentum. The aver-
age annual rate of growth of non-Communist demand
for chromium is likely to range between 3.0 and 3.5
percent for the rest of the century.- At this rate,
chromite consumption could rise to about 11.5 mil-
lion tons by 1990,b well within producer capabilities
if normal expansion plans are pursued.
(NMAB, Contingency Plans for Chromium Utilization, Washing-
ton: National Academy of Sciences, 1978); Resources for the
Future-2.25 percent (Leonard L. Fischman, World Mineral
Trends and US Supply Problems, Washington: RFF, 1980).
b This is based on 1978 non-Communist consumption of primary
chromium of about 2.3 million tons and assumes that the average
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Chromium:
Western Vulnerabilities
and Options
Introduction
Chromium is perhaps the most strategic of all metals.
There are no substitutes for many of its critical
metallurgical and chemical uses. Output of chromite,
the ore from which chromium is extracted, is highly
concentrated in a few countries. South Africa, the
USSR, Albania, and Zimbabwe account for almost
three-fourths of world production.' OECD countries
produce less than one-tenth of world output, and that
comes mainly from Finland and Turkey. Other impor-
tant producers include India, the Philippines, Mada-
Figure 1
Major OECD Ferrochromium Alloy Producers
Share of World Output, 1960-80
Percent
Norwa> I:rand i Japan
Sweden West Gennan, I titled Sale.
World Output
(Thousand tons)
gascar, and Brazil.
The major OECD consuming countries depend on
imports from southern Africa for more than half of
their chromium needs. The region has an abundance
of cheap chromite and a record of reliable delivery.
Before 1970, chromite-producing countries shipped
most of their output to OECD countries for conver-
sion into ferrochromium alloys. Since then alloy pro-
duction has largely shifted to the mining countries
because of their lower energy and labor costs, fewer
environmental constraints, and desire to capture more
of the value added to chromium products (figure 1).
Savings also accrue because the alloys are cheaper to
ship than the bulk ore. South Africa is especially
blessed by its huge reserves of low-grade chromite
that can be used to make low-cost charge chrome and
high-carbon ferrochromium, both of which are well
suited to the production of stainless steel with current
technology.
Impact of Market Disruptions
and Price Increases
Although the availability of chromium from southern
Africa has been quite reliable, confidence in future
access to this resource is reduced by the region's grave
economic, social, and political problems. These prob-
lems have already impeded mineral development and
In this paper chromite output is measured in terms of beneficiated
ore or concentrates. Data presented here, therefore, may differ
from those published elsewhere for certain countries, particularly
the Soviet Union, which report statistics on run-of-the-mine output
only
output in Angola, Mozambique, and Zaire and might
well affect chromium production and export in South
Africa and Zimbabwe during the 1980s. Nor is
availability from the other two major suppliers, the
USSR and Albania, assured (see appendix A).
Because no major disruption of the chromium market
has ever occurred, the extent and nature of the
consequences can only be surmised. The Soviet chro-
mite embargo during the Korean war as well as the
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disturbance of Zairian cobalt production in 1977 and
1978 do, however, provide some experience with the
curtailment of critical mineral supplies. This experi-
ence suggests that the impact of such disruptions is
likely to be smaller than anticipated because of the
ability of governments and the marketplace to bring
about development of new chromium sources and
because of increased recycling, substitution, and con-
servation. Moreover, defense needs and critical civil-
ian uses account for only a part of the consumption of
strategic materials such as chromium. These could be
easily met in any crisis while less essential and
frivolous uses are restricted or eliminated.
Any likely increase in prices caused by collusion or
supply disruptions would not greatly decrease demand
for chromium. At least half of this demand is for
stainless steel and is relatively inelastic with respect
to price. Because chromium accounts for only 5
percent of the cost of stainless steel, tripling the price
of chromite would raise the price of the steel by only
10 percent. Stainless steel has no substitutes for some
of its applications and only expensive and less suitable
substitutes for others; such a small increase in price
would hardly affect its use. A US Government-
sponsored study concludes that a chromite price in-
crease of 2,000 percent would be needed to halve
demand for stainless steel.' Other chromite uses are
much more price elastic. In all, the study estimates
that tripling its price would cause chromite demand to
fall by 25 percent.
Short-Run Disruption of Chromium Supplies. We
believe that a loss of chromium supplies from south-
ern Africa that lasted no more than six months could
be borne without cutting supplies for essential uses in
the OECD countries, even if accompanied by embar-
goes of exports by Albania and the USSR. During the
current severe economic recession, a short-term loss
would be especially easy to manage because of the
relatively low level of demand.
Ferrochromium alloy capacity in the non-Communist
world outside southern Africa is sufficient to have
satisfied almost all non-Communist demand in 1979,
the last peak year, and could easily satisfy the current
Z National Bureau of Standards, 1976, Charles River Associates,
The World Chromite Market, Washington, D.C.: National Bureau
of Standards, 1976, p. 4-1 la.
depressed demand. Non-Communist chromite capaci-
ty outside of southern Africa could supply more than
half of the current needs of the Western countries. In
addition, stocks of chromite and alloys among non-
Communist producers outside of Africa are relatively
high and could help to cushion the shock. Prices
would rise somewhat as markets became reorganized,
but increases would be moderated by the large over-
hang of producer inventories, the use of slack capaci-
ty, and the expected resumption of exports from
southern Africa at the end of the crisis.
A short disruption occurring later in the 1980s would
pose greater difficulties but could still be managed.
Non-Communist production of chromite and alloys
outside Africa is likely to shrink through the decade,
while needs increase. Dwindling unused capacity and
stocks would not be able to replace the loss of supplies
from southern Africa. Prices would rise faster, and
increased recycling, conservation, and substitution
would be needed to balance supply and demand.
Higher prices along with some government interven-
tion would assure rapid reallocation of available chro-
mium supplies to essential defense and critical civilian
uses. Less essential uses of chromium might be
banned or postponed. As much as one-third of US
chromium demand could be eliminated through the
use of already available substitutes, but the expecta-
tion of renewed exports from southern Africa in a
short time would discourage methods and materials
requiring a large investment of time or money.
Long-Run Disruption of Chromium Supplies. The
loss of chromium supplies from southern Africa ac-
companied by the embargo of exports from Albania
and the USSR could be managed even if these
disruptions were expected to last indefinitely, but
would require substantial restructuring of chromium
industries and uses. Available stocks and capacities
would be inadequate. It would be necessary to expand
the capacities of other producers, to increase recy-
cling, to develop new chromite sources, to eliminate
nonessential uses, to reduce waste, to decrease the
chromium content of products, and to substitute other
metals for chromium and other materials for chromi-
um products
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These changes would require time and great expense
and would result in higher product cost and poorer
performance. Since they would not be maintained if
cheap chromite and ferrochromium alloy exports from
South Africa resumed, most of the changes would be
attempted only if the disruption appeared certain to
last at least five years. Without this assurance chro-
mium prices would have to rise very high indeed to
provide enough short-term gain to commercial inter-
ests to induce them to make the effort needed to
bridge a supply disruption of intermediate length
Governments in the industrial countries would proba-
bly act to mitigate high prices and to assure the
availability of chromium for critical uses throughout
the crisis. Strategic stockpiles could be released.
France, Japan, and perhaps Sweden maintain stock-
piles of chromium equal to several months' current
consumption. The US stockpile is equal to 150 percent
of US metallurgical and chemical chromium con-
sumption in 1979, the year of peak consumption. If
available conservation and substitution methods were
quickly introduced, the stockpile of metallurgical and
chemical chromium could last more than two years at
the 1979 level of demand, long enough to bring new
chromite mines into operation
Because there would be pressure to share these strate-
gic stocks with allied countries, governments might
well seek to develop new sources of chromite as
quickly as possible. The United States has large
resources in Montana, Oregon, and other western
states; other OECD countries would probably turn to
resources in Third World countries. Indeed, France,
West Germany, and Japan are already encouraging
efforts by their nationals to develop mineral resources
in the LDCs in hopes of expanding and diversifying
sources of strategic minerals.
The US Bureau of Mines estimates that a five-year
loss of chromium supplies from southern Africa,
Albania, and the Soviet Union-assuming chromite
capacity elsewhere grew by only 10 percent a year-
would cause the price to rise, peaking in the fourth
year of the crisis 11 times higher than it would have
otherwise. This increase would reduce chromium con-
sumption and would cost the United States about
$4 billion over eight years. Since chromite capacity,
however, could be expanded by more than 10 percent
a year in a number of non-Communist countries
outside southern Africa, the impact of a cutoff on
price is probably overestimated, and the overall cost to
the United States would probably be lower. National
Material Advisory Board (NMAB) analysis suggests
that the 30-percent reduction in chromium supplies
that would be sustained by the metallurgical industry
could be borne without serious consequences.
Supply Alternatives
Proven non-Communist chromite resources outside
southern Africa total more than 500 million tons,
more than enough to satisfy likely Western require-
ments for the rest of the century (table 1). Resource
estimates are probably conservative; chromite ores are
difficult to identify and measure, and there is general-
ly little incentive to explore for them as long as cheap,
abundant South African chromite is available. In-
deed, known resources outside southern Africa have
doubled in the last decade, growing faster than non-
Communist demand:
? India's resources have expanded from only 13 mil-
lion tons to more than 100 million tons.
? Brazil's resources have grown 90 percent to 22
million tons.
? Finland's resources have risen from 15.5 million to
75 million tons.
? Turkish resources are estimated to be 150 percent
greater.
? Madagascar, Papua New Guinea, and Yugoslavia
have recently discovered large chromite deposits.
Additional discoveries are likely to augment known
resources greatly by the end of the century as LDCs
attempt to assess their mineral wealth.
The United States has an estimated 241 million tons
of chromite resources, according to the US Bureau of
Mines. These, however, contain only 10 percent chro-
mium, well below the 30 to 50 percent in ores
commonly mined, and would not be commercially
worth exploiting unless the price of chromite were to
rise at least 300 percent. They could provide as much
as 500,000 tons of chromium annually, three-quarters
of US demand in 1979. Such output, however, could
be sustained for only five to 10 years before declining
ore grades caused costs to rise even higher
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Table 1 a
Chromite Resources, 1981 b
Estimated Reserves Total Resources 1981 Output Average Annual Growth
(million tons) (million tons) (percent of reserves) Rate of Resources
World 3,635 ~ 33,056 c 0.3
Market economy countries 3,359 c 32,754 c 0.2
1973-81
(percent)
North America 0 251
Canada 0 10 18
Brazil 2 22 20.4
Colombia NA NA
Western Europe 30 ~ 110
Cyprus - -- ----- NA NA
Finland 25 75 1.6 22
Greece NA NA
Greenland 0 10
Turkey 5 25 8.0 12
South Africa 2,270 22,224 0.1 28
Sudan NA NA
Zimbabwe 1,000 10,000 0.1 32
India 50
135
100 c
Japan NA NA
New Caledonia NA NA
Philippines 3 23
Communist countries 276 c 302 c
Albania 2
Cuba 3
USSR 271
Vietnam NA
a Source: US Bureau of Mines and CIA estimates.
b Resources include those chromite deposits that are currently or
potentially exploitable. Reserves include only those ores that are
economically worthwhile to exploit given current prices and
technology.
c Minimum level; data for some countries are incomplete or not
available.
14.8
1.3
57.2
1.0
0.9
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South Africa is aggressively expanding its chromite
production and could add considerable capacity very
quickly at little or no increase in the relatively low
unit cost. Other countries are also expanding their
capacities:
? Industry reports indicate that Brazil could add Country Capacity Status
225,000 tons to its chromite capacity by 1987. (thousand
? Greece is expanding its chromite capacity by 50,000 tons)
tons.
? The Sudan is increasing its chromite capacity by
80,000 tons.
Other countries that have recently discovered large
new chromite resources would probably expand their
production capacity if the price incentive were suffi-
cient.
Ferrochromium alloy capacity could also be rapidly
expanded. Much new investment is already scheduled
outside southern Africa, relying on the technical and
financial help of Western companies (table 2). This
expansion is now slowed because of weak market
conditions but could be accelerated if conditions
warranted. US firms are involved in ferrochromium
alloy production in Zimbabwe and South Africa,
areas of potential difficulty. Japanese companies are
facilitating expansion programs in Brazil, Turkey,
and South Africa and developing chromite mines in
Madagascar and the Sudan.
If this planned capacity should prove insufficient to
meet demand, new facilities could be built in one or
two years in the industrial West or in two to three
years in undisrupted chromite-producing countries
hese facilities would
aye somewhat higher operating costs than those in
southern Africa and would not be built by private
firms unless the disruption were expected to last at
least five years or government assistance were forth-
coming. Along with existing capacity and that already
under construction, the new plants could satisfy non-
Communist demand for ferrochromium alloys as long
as the supply of chromite remained adequate.
Table 2 a
Planned Expansion of
Ferrochromium Alloy Capacity
Albania
100,000
In progress
Greece
33,000
Scheduled for completion in 1983
India
100,000
Scheduled for completion by 1984
100,000
Under consideration
Under consideration, needs funding
Philippines
50,000
Scheduled for completion in 1983
Feasibility study, needs funding
South Africa
100,000
Could be added very quickly
Zimbabwe
50,000
Under consideration
a Source: International Iron and Steel Institute, Brussels,
March 1981, Chromium and the Steel Industry.
Technological Changes
The NMAB estimates that one-third of current US
chromium requirements could be eliminated by avail-
able substitutes and conservation techniques (figure
2). Technological developments over the next 10 years
could do away with another 45 percent. These
changes would raise costs and lower performance and
therefore will not occur as long as cheap chromite and
ferrochromium alloys from South Africa are avail-
able.
According to the NMAB, US metallurgical uses of
chromium could be cut 7 percent through conserva-
tion techniques already available. Processing losses
can be reduced by the use of die forgings, computer-
aided design and manufacturing, and near-net-shape
casting and powder metallurgy. The trend to lighter,
smaller vehicles with advanced emission controls will
also reduce the need for chromium. Another 5 percent
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Figure 2
US Potential Savings of Chromium-Containing Materials
Percent of current consumption
_ Now
Within ten years
Conservation
Recycling
Substitution
Total
Conservation
Recycling
Substitution
Total
Conservation
Recycling
Substitution
Total
Conservation
Recycling
Substitution
Total
of US metallurgical consumption could be eliminated
within 10 years through the further development of
other technologies, including:
? Ion implantation.
? Cladding.
? Surface modification.
? Hot isostatic pressing.
Only 10 percent of US chromium needs are now met
by recycling, and as long as the price remains low
additional recycling efforts will not be attractive. The
NMAB believes, however, that technological innova-
tions over the next 10 years could make possible the
recycling of 5 percent of the chromium used in US
metallurgical applications, 6 percent of that used for
chemical purposes, and 65 percent of the chromium
used in US refractories.
Available substitute materials for many chromium
uses are either more costly, less effective, or them-
selves subject to supply disruption. Higher chromium
prices, however, would make them acceptable.
NMAB estimates indicate that these materials could
replace a quarter of the chromium used in US
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Chromium can be replaced in some of its applica-
tions. Nickel, molybdenum, cobalt, silicon, and alu-
minum could give steel much of the corrosion resist-
ance now provided by chromium. Vanadium could
also be used to replace chromium in some tool steels.
Most of these metals, however, are more costly than
chromium. No suitable substitutes are available for
chromium in superalloys. Moreover, the United
States depends on imports for most of its aluminum
and cobalt, and the strategic stockpiles of cobalt,
aluminum, and vanadium are below US goals.
For decorative purposes or in noncorrosive environ-
ments, it may be replaced by oxidized aluminum,
epoxy- or glass-coated carbon steel, plastic, alumi-
nized steels, or by copper, zinc, and aluminum alloys.
In corrosive environments, various alloy steels and
titanium are possible substitutes. In corrosive, high-
temperature environments, titanium alone is avail-
able. These substitutes, however, cost so much more
than stainless steel that even a many fold increase in 25X1
the price of chromite would have relatively little
effect on its competitive advantages.
In chemical applications, chromium can be replaced
by high-impact polymers, zinc, or aluminum for
plating purposes only f abrasion and corrosion resist-
ance are not required. Substitutes perform more
poorly as paint pigments. There are no known substi-
tutes for chromium in drilling muds, water treat-
ment, or leather tanning.
In products where chromium is irreplaceable, other
end products can often be substituted. Stainless steel,
the main use of chromium, has various substitutes.
metallurgical and chemical applications and one-third
of that employed in refractories. Technological devel-
opments over the next 10 years could permit replace-
ment of an additional one-third of current metallurgi-
cal usage, one-half of the chromium used in chemical
applications, and one-half of that used for refrac-
tories.
Future developments may create other substitutes for
chromium. Promising materials include:
? Fiber-reinforced plastics.
? Other polymers.
? Low-chromium and chromium-free alloys for less
critical applications.
? Ceramics, including glass.
? Composite materials.
? Superplastic metals.
25X1
^
25X1
^
25X1
25x11
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Figure 3
Chromite Import Sources for Major OECD Users, 1978-81
Exporting Countries:
South Africaa Albania
USSR Other
Spain
United Kingdom
Italy
France
West Germany
Sweden
United States
Japan
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Figure 4
Ferrochromium Alloy Import Sources for Major OECD
Users, 1979'
Thousand tons
Exporting Countries:
-
South Atricuh - Albania
? USSR Other
France
United Kingdom
ItaIs
United States
West Germany
Japan
a Includes direct shipments and imports of ferrochromium alloys from third
countries that rely on the source country for chromite.
h IMay include imports from Zimbabwe.
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Figure 5
South Africa: Major Chromium Facilities
Bushveld Igneous Complex
Chromium mining region
$ Smelter
? Major ore-handling port
200 Kilometers
200 Miles
South '
Atlantic
Ocean
n d i a n O c e a n
Richard's
Bay
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Botswana
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Appendix A
Major Chromite Producers:
Potential for Disruption
South Africa. South African chromite is concentrated
in the vast Bushveld Igneous Complex, which also
contains the world's largest known reserves of vanadi-
um and platinum-group metals (figure 5). There are
18 active, widely dispersed mines, at least half of
them each producing more than 200,000 tons of ore
per year. Because no one or two mines dominate
production, it would be extremely difficult for insur-
gents to cut off all mine output. South African
security forces probably could quell any disruption
rather quickly.
The situation is similar for the South African ferro-
chromium alloy smelters. The six alloy producers are
also widely scattered, and annual smelter capacity
ranges from 70,000 to 165,000 tons each. Power is
abundant and comes from a variety of sources via a
well-integrated grid. Insurgents would probably have
to be satisfied with a limited disruption. Unless this
was accompanied by damage to facilities, production
shortages could be made up by on-site inventories.F
We believe that it would be nearly impossible for
insurgents to cut all supply routes to ports. South
Africa's highly developed transportation network has
few choke points and a number of alternative routes.
Ferrochromium alloy facilities are linked by rail to
several ports, only one of which, Maputo, is located
outside the country.
Because of the recent growth of independent black
trade unions, the most likely cause of disruptions to
the chromium industry is labor disturbances. These
could affect chromium production directly or might
disrupt transportation services. Such disturbances,
however, are likely to be only of short duration.
Any collusion among producers to raise the price of
chromite would have to involve South Africa because
of its dominance over the industry (table A-1). We
believe, however, that South Africa would have little
to gain from such action. It will probably continue to
supply chromium at a reasonably low price so as to
exploit its competitive advantage and expand its mar-
ket share. Exports are already shifting to ferrochro-
mium alloy as OECD competitors are driven out of
the smelting business. Dominance in that market
could support a highly competitive stainless steel and
superalloy industry by the end of the century, which
would substantially increase South Africa's industrial
and commercial power.
Zimbabwe. Unlike South Africa, Zimbabwe has a
number of vulnerable areas that could be exploited by
insurgents (figure 6). Roughly 70 percent of the
chromite output comes from two adjacent mines,
Selukwe Peak and Railway Block. In addition, the
two ferrochromium alloy facilities, one with a capaci-
ty of 180,000 tons per year and the other with a
capacity of 210,000 tons per year, are only 60 kilome-
ters apart. All of their power comes from the Kariba
Dam, which supplies 70 percent of Zimbabwe's ener-
gy needs. In late 1983 the Hwange thermal power
station will add substantially to Zimbabwe's energy
resources, but not enough to make up for the loss of
Kariba.
The transportation network in this landlocked country
is also quite vulnerable. If insurgents severed the rail
line just south of Gweru (Gwelo), they could effective-
ly cut off traffic to South African ports, the major
route for Zimbabwean chromium exports, and to
Maputo in Mozambique. Zimbabwe would then be
forced to export via Beira in Mozambique, which is ill
equipped to handle the traffic. More importantly, the
rail lines to Beira and Maputo are highly vulnerable
to sabotage by Mozambican insurgents.
The USSR. The Soviet Union has for years sold the
West a variety of minerals and metals-including
such critical materials as chromite, platinum group
25X1
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Table A-1 a
Chromium Output of Key Producing Countries, 1980
Output b
(thousand tons)
Value
(million 1980
US $)
Share of
World Output
(percent)
Share of
GNP
(percent)
Chromite
Ferrochromium
810
615
27
1
2,500
275
26
NEGL
510
380
17
NEGL
118
11
15
11
NEGL
552
200
a Source: Chromite output, price, and world output share from US
Bureau of Mines, Chromium Preprint From the 1981 Minerals
Yearbook. Ferrochromium output, price, and world output share
from US Bureau of Mines, Ferroalloys Preprint From the 1981
Minerals Yearbook.
25X1
25X1
metals, titanium sponge, and manganese ore (figure
7). Soviet chromite exports, however, have declined
considerably in recent years:
? Soviet raw material output growth is lagging.
? The severe economic recession in the industrial
West has greatly reduced demand for chromite.
? Demand for Soviet chromite of declining quality has
waned in the face of strong South African competi-
tion.
Contrary to some popular commentary, we do not
believe that the USSR is now engaged in any sort of
resource war with the West or is likely to do so in the
near future.' A Soviet chromite embargo during the
Korean war did not noticeably damage Western
industrial interests or harm the war effort because
alternative sources were available in the United States
and elsewhere. During the Vietnam war (1965-73),
Soviet chromite exports to the United States in-
creased dramatically. Hence, another Soviet-initiated
embargo does not seem likely; however, it is possible
that the USSR would withhold its chromite from the
market to add to the impact of a disruption of supplies
from southern Africa.
modity.
We believe it more likely that the USSR would
continue to export chromite to take advantage of the
higher prices created by a crisis. With the opening of
a huge new deposit in Kazakhstan in 1985, it might
even be able to expand exports to capture disrupted
markets. It might do so selectively, however, making
chromite available only to certain countries to in-
crease its influence among them and to weaken the
Western alliance. This would eventually benefit all
consumers but would offer some competitive advan-
tages to those doing business with Moscow. The
availability of Soviet chromite in Western markets
during a prolonged disruption would discourage devel-
opment of alternative sources and thus increase West-
ern dependence on the East for a very critical com-
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Figure 6
Zimbabwe: Major Chromium Facilities
-?Hwange
Makgadikgadi
(pans)
Botswana
HARARE
Kwekwel ,L
ll
r Gweru
-all
j Shurugwi
(Selukwe)
? Masvingo
(Fort Victoria)
83
o South African Swaziland
/// Chromium mining region
Smelter
th Africa
LILONGWE
Malawi
Mozamjiiqu
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Figure 7
Destination of Chromium Exports of Major
Producing Countries, 1979
Percent
Non-Communist
Communist
South African
Otherb 10
Other OECD 16-
Albania. Communist Albania broke off relations with
the Soviet Union in 1960 and, more recently, with
China and now exports its chromite mainly to OECD
countries. Because these countries import only one-
tenth of their needs from Albania, this Communist
waif is probably more dependent on them than they
are on it. While a disruption of chromite output is
improbable, an embargo or change in trade partners
might occur for ideological reasons. Albania by itself
cannot disrupt the chromium market. Collusion with
South Africa or the Soviet Union is unlikely, but
Albania no doubt would take advantage of any oppor-
tunity to raise its own price to increase foreign
exchange earnings.
United States 27
Albania
Other Communist 9
Yugoslavia 22
aMay include exports from Zimbabwe.
bMay include some Communist countries.
Sweden 23
West Germany 20
-United States I I
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Appendix B
Chromium Production and Consumption Statistics
Table B-1 a
Chromite Concentrates: Production and Apparent Consumption
Production
World
6,000
9,971
9,210
OECD
700
1,100
1,263
865
United States
0
0
0
0
LDC
1,625
2,225
1,941
1,890
South Africa
1,425
2,075
3,297
2,865
Communist
2,250
2,880
3,470
3,590
USSR
1,750
2,080
2,400
2,400
China
0
0
0
0
Other
800
1,070
1,190
Consumption
World
6,770
8,225
10,302
8,375
OECD
5,250
5,325
4,771
3,680
United States
1,275
800
1,100
850
LDC
800
1,700
2,944
2,275
Communist
720
1,200
2,587
2,420
USSR
570
900
1,625
1,700
Other
150
300
962
720
a Source: CIA estimates based on various industry and US Bureau of
Mines publications.
b Estimated.
Bureau of Mines estimates. The USSR reports only run-of-the-
mine output, a figure much larger than estimated concentrates
production.
d Apparent consumption is estimated as production less net exports.
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Table B-2 a
Chromite Concentrates:
Consumption, Production, and Capacity b
Apparent Percent of Level, Percent of
Level, 1979 c World 1981 World
(thousand tons) Total (thousand tons) Total
10,302
Market economy countries 7,715 75
Canada 88 1
11
NEGL
Greece
16
NEGL
43
NEGL
Italy
232
2
118
1
Turkey
228
2
399
United Kingdom
92
1
Madagascar
8
NEGL
99
a Source: Consumption is estimated from data provided in Interna-
tional Iron and Steel Institute, Chromium and the Steel Industry,
Brussels, March 1981. Production estimates are from the US
Bureau of Mines. Capacities are estimated from data provided by
the US Bureau of Mines and industry publications.
b Because of rounding, components may not add to totals shown.
c Production less net exports.
25X1
Level, Percent of
1981 World
(thousand tons) Total
11,845
7,830 66
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Table B-2 - (continued)
Chromite Concentrates:
Consumption, Production, and Capacity b
Region
Apparent
Level, 1979
(thousand tons)
Percent of
World
Total
Level,
1981
(thousand tons)
Percent of
World
Total
Level,
1981
(thousand tons)
Percent of
World
Total
South Africa
2,027
20
2,866
31
4,000
34
Sudan
27
NEGL
40
NEGL
Zimbabwe
4
526
6
900
8
India
50
NEGL
336
350
3
Iran
80
30
NEGI.
30
NE(;[.
Japan
974
11
NEGL
20
NEGI.
New Caledonia
3
NEGL
10
NEGI
Pakistan
3
NEGL
20
NEGI.
Philippines
444
5
600
5
Communist countries
2,587
3,590
39
4,015
34
Albania
100
1,143
12
1,150
10
China
100
Cuba
29
Czechoslovakia
180
East Germany
60
Hungary
45
NEGL
Poland
190
2
USSR
1,625
16
2,800
24
Vietnam
15
NEGI
Yugoslavia
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Table B-3 a
Ferrochromium Alloy Consumption, Production, Capacity b
Apparent
Level, 1979 c
(thousand tons)
Percent of
World Total
Level, 1979
(thousand tons)
Percent of
World Total
Level, 1981
(thousand tons)
Percent of
World Total
World
Market economy countries
United States
17
268
9
323
8
Brazil
45
2
92
3
105
3
7
NEGL
5
NEGL
6
NEGL
Belgium-Luxembourg
Finland
23
49
55
150
95
3
140
4
263
60
2
130
3
Italy
116
43
Norway
Spain
219
7
220
6
30
1
60
2
United Kingdom
South Africa
Zimbabwe
29
1
200
Australia
12
NEGL
India
Japan
22
South Korea
Taiwan
NEGL
Communist countries
22
Albania
30
1
92d
2d
28 d
21 d
Hungary
North Korea
Poland
NEGL
397
432
72
450 d 12,1
84 2
a Source: US Bureau of Mines, Ferroalloys, Preprint From the 1981 b Because of rounding, components may not add to totals shown.
Minerals Yearbook and International Iron and Steel Institute, ~ Production less net exports.
Chromium and the Steel Industry, March 1981. d Minimum level; data for some countries are incomplete.
Confidential 18
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Figure 8
World Distribution of Chromium Output,
Use,and Exports, 1979
Percent
? Non-Communist
Communist
Output
Albania 10
USSR 24
OECD 7
LDCs 5
South Africa 6
-United States 15
Japan 13
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