Interested in how to invest in chromium? Learn about supply and demand dynamics and ways to get exposure to this industrial metal.
Chromium (or 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.
How to invest in chromium: Supply and demand dynamics
Since 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.
The global chromium market is expected to reach US$17.74 billion by 2025, thanks to increased demand from the steel sector.
More than 95 percent of chromium demand comes from metallurgical applications, with stainless steel representing 78 percent of consumption in 2019. Stainless steel production also requires large amounts of iron ore. “In the automotive industry the growing demand for thin coatings is one of the major applications of chromium,” reported IndustryARC. “The manufacturers use thin coatings to control costs and environmental effects. Thus, reduce vehicle weight and increase the service life and performance.”
As the leading producer of stainless steel and ferrochromium, China is the largest consumer of chromium. The US purchased US$810 million or 4 percent of the global chromium supply in 2019.
In terms of supply, the majority of the world’s chromium production originates in South Africa, Turkey and Kazakhstan. According to the US Geological Survey, South Africa produced 17 million metric tons (MT) of chromium in 2019, beating out the rest of the world’s chromium producers by a wide margin.
Interestingly, South Africa used to be the world’s largest producer of ferrochrome as well; 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.
How to invest in chromium: Ways 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 producer is major miner Glencore (LSE:GLEN), which produces the metal in South Africa.
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.
This is an updated version of an article first published by the Investing News Network in 2011.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.