[SMM Analysis] Higher Chrome Ore and Ferrochrome Prices Cushion Merafe's H1 Earnings Despite Lower Ferrochrome Output

Published: Jul 27, 2026 22:57

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Merafe Resources expects significantly stronger earnings for H1 2026 despite a sharp decline in ferrochrome production, with the company's latest trading statement reflecting the supportive chrome ore and ferrochrome pricing environment during the reporting period.

According to Merafe's Production Report and Trading Statement released on July 27, attributable ferrochrome production for the six months ended June 30, 2026, declined 75% year-on-year to 28,000 mt from 112,000 mt in H1 2025. The decline was mainly due to the continued suspension of production at the Glencore-Merafe Chrome Venture's Wonderkop and Boshoek smelters, together with the partial suspension of the Lion smelter. Attributable chrome ore production remained relatively stable at 425,000 mt, down 4% year-on-year from 443,000 mt, while attributable PGM concentrate production declined 5% to 6.7 koz.

Despite the lower production, Merafe expects basic earnings per share (EPS) of 19.5-21.4 South African cents, up 110%-130% year-on-year from 9.3 cents, while headline earnings per share (HEPS) are expected at 19.5-22.0 cents, representing an increase of 55%-75% from 12.6 cents. The company attributed the improved earnings to higher commodity prices and increased sales volumes during the period. Cash and cash equivalents attributable to Merafe stood at ZAR1.591 billion as at June 30, 2026, excluding ZAR410 million reserved for environmental rehabilitation obligations. The company's interim financial results are scheduled for release on or about August 11, 2026.

SMM's price data supports Merafe's earnings outlook. As China remains the largest export destination for South African chrome ore and ferrochrome, China's spot market prices provide a representative benchmark for assessing the pricing environment faced by South African producers. During H1 2026, South African chrome ore (Cr₂O₃ 40-42%, CIF China) increased from around US$265/mt in early January to approximately US$319/mt in late March and early April before easing to around US$280/mt by the end of June. Over the same period, China's domestic average high-carbon ferrochrome price rose from about CNY 8,200/50 basis mt to around CNY 8,750-8,800/50 basis mt, before softening to approximately CNY 8,190-8,290/50 basis mt at the end of June.

Compared with H1 2025, the first half of 2026 maintained a higher average price base across both chrome ore and high-carbon ferrochrome. In H1 2025, South African chrome ore prices generally traded between US$205/mt and US$300/mt, while China's domestic average high-carbon ferrochrome prices increased from around CNY 7,267/50 basis mt to approximately CNY 8,517/50 basis mt. The stronger average pricing environment in H1 2026 is consistent with Merafe's statement that higher commodity prices and increased sales volumes supported earnings despite substantially lower ferrochrome production.

SMM believes Merafe's latest update highlights the resilience of producer earnings during H1 2026. Although prolonged smelter suspensions significantly reduced ferrochrome output, the stronger chrome ore and ferrochrome price environment during much of the first half helped offset the impact of lower production. Going forward, the pace of smelter restarts and the direction of chrome ore and ferrochrome prices will remain key factors influencing the recovery of South Africa's ferrochrome industry.

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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