S.Africa's mining industry calls chrome export tax 'blunt instrument'

JOHANNESBURG (Reuters) - South Africa's main mining industry body on Friday criticised the government's proposal of a chrome ore export tax to boost domestic ferrochrome producers, saying a tax would not address the key issue of globally uncompetitive electricity costs.

Processing chrome ore to produce stainless steel ingredient ferrochrome is highly power-intensive, and South Africa's ferrochrome industry has suffered because of the country's unreliable electricity and frequent power cuts.

"The critical component of competitiveness is the availability of a cost-effective and consistent electricity supply," the Minerals Council said in a statement.

State power utility Eskom has battled to meet demand for years due to faults at its coal-fired power stations, and is often cited as the main drag on growth in Africa's most industrialised economy.

The Minerals Council said rising electricity costs had driven 40% of South Africa's ferroalloy production capacity to be closed or mothballed in the last decade.

"Export taxes are generally a blunt instrument that have material unintended consequences," the industry body added.

Chrome SA, a group representing chrome ore producers, on Thursday came out against the proposed tax that would make it more expensive for them to export their production.

South Africa is the world's biggest producer of chrome ore and a key supplier of the metal to China. A South African export tax would likely drive global chrome prices up, traders said.

(Reporting by Helen Reid; Editing by Alex Richardson)