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Chromium, commonly referred to as chrome, is a tough, gray industrial material that has an especially high resistance to heat, corrosion and decomposition.
It is one of the more durable metals available, and is an integral component in stainless steel, which is used in infrastructure and machinery and supports construction activity around the world.
Many investors believe chromium investing is a compelling opportunity, and to help those interested in the space, we’ve put together a brief guide of chromium supply and demand dynamics. Read on to learn more about how to start investing in this industrial metal.
Chromium investing: Supply and demand dynamics
The past few years prior to 2018 have been difficult for the chromium market. In 2016, prices for chromite, an iron chromium oxide, and ferrochrome, a chromium and iron alloy, hit six year lows due to falling production costs, oversupply and slower demand.
Thanks to increased demand from the oil and gas sector, which uses chromium in the steel tubing, as well as a growing need from the aerospace industry, which uses the metal in coatings and finishes, there has been a supply shortfall of the industrial metal over the last 18 months, resulting in upward momentum in the chromium price.
The International Chromium Development Association market research analyst Loïc Racon said at the end of 2016 that the chromium market was “awakening” and that momentum would increase owing to Chinese demand.
In total, 92 percent of chromite goes toward metallurgical applications like stainless steel. All in all, stainless steel accounts for 60 percent of chromium demand. Stainless steel also requires large amounts of iron ore.
As one of the largest developing countries in the world, China imported the most chromium in 2018. The US purchased US$1.1 billion or 6 percent of the global chromium supply.
In terms of supply, more than half of chromium is produced in South Africa and Kazakhstan. According to the US Geological Survey, South Africa produced 16 million metric tons (MT) of chromium in 2018, beating out the rest of the world’s chromium producers by a wide margin, while Kazakhstan produced a total of 4.6 million MT.
Interestingly, South Africa used to be the world’s largest producer of ferrochrome as well as the top chromium producer; however, it lost that title in 2012 to China due to power supply constraints.
One of the niche uses of chromium is as an alloy in dental restorations. While gold and ceramic alloys are more common in industrialized countries, developing nations often use an alloy mix of nickel and chromium when performing dental restorations as these materials are more affordable.
Chromium investing: How to start
Chromium investing can be challenging, as the metal is not traded on any public exchanges; as a result, owning the physical metal is difficult and risky.
For that reason, many investors interested in chromium investing choose to buy shares of companies engaged in ferrochrome production. The largest publicly traded producers are major miner Glencore (LSE:GLEN), which produces the metal in South Africa, and Eurasian Resources Group, whose mining, processing and refining of the chromium raw material takes place in Kazakhstan.
It is also possible to buy shares of smaller companies focused on chromium exploration and development activities, but finding and evaluating these companies requires research and extensive due diligence.