MILLARD ARNOLD | Trump tariffs jeopardise steel supply chains

Washington’s new 12.5% forced labour tariff on South African goods took effect on July 24 and, unlike finished steel, ferrochrome didn’t escape it. The tariff carries an exclusion for products already covered by the existing section 232 steel duties, but ferrochrome, an alloy input rather than a finished steel article, has never fallen under the programme.

Ferrochrome gets no benefit from the exclusion, and no relief from the new tariff. The result: the one input America’s stainless and defence-grade steel producers can least afford to lose became more expensive to import.

South Africa supplies 96% of the chromite ore America imports and remains the single largest source of the finished ferrochrome alloy itself. What that means is that South Africa ferrochrome is not only a convenient preference. It is vital, a necessity that inexplicably and unnecessarily has become more costly.

Ferrochrome is an iron-chromium alloy, and it’s one of the largest input costs in stainless steel production. Whoever controls the ferrochrome supply controls the economics of American stainless-steel manufacturing. South Africa mines close to 45% of the world’s chromite ore, the raw material for ferrochrome, more than any other country.

But almost none of this supply is processed into finished products on American soil. None of it is locked into the long-term agreements US manufacturers need if they are to plan with confidence. For US steelmakers that’s not only a missed opportunity. It’s a structural vulnerability in a supply chain the US government has formally classified as a critical mineral and yet made more expensive to acquire.

The US is almost entirely dependent on imported ferrochrome for stainless steel production. South Africa is a key strategic supplier into the US.

American buyers offer the predictability, market size and comfort of doing business, which should make them the preferred offtake counterparty, if given the opportunity. That logic suggests that what’s needed is long-term offtake agreements, predictable supply chains and mutual commercial benefit.

Instead, most ferrochrome enters the US through spot markets with no structural arrangement to secure supply or provide American mills the certainty they require.

The issue is structural: South African ferrochrome beneficiation projects — the facilities that convert raw chromite ore into the finished alloy US mills need —have struggled to attract the patient capital and strategic commitment required to make multi-year agreements possible.

Which is precisely where the opportunity lies. What’s missing is the structured offtake commitment, the long-term buyer agreement that turns a feasibility study into a financed, viable operating project.

From an American steelmaker’s perspective the commercial case is straightforward. Long-term offtake agreements offer advantages spot-market purchasing can’t match: price stability. Ferrochrome prices can be volatile, reflecting shifts in stainless steel demand, raw material costs and energy prices, and long-term contracts hedge that volatility and protect American mill economics.

For US steelmakers this isn’t a minor efficiency gain.