Ferroglobe South Africa, a leading producer of silicon metal and ferroalloys, has issued a stark warning: unless reduced electricity tariffs are confirmed imminently, the company may halt operations at all its facilities. This announcement comes as a response to a sustained and extraordinary surge in electricity prices, which has jeopardised the viability of the company’s operations and placed thousands of jobs at risk.
Since 2007, electricity prices in South Africa have soared by more than 900%, a rate far outpacing global trends. According to the International Energy Agency, industrial electricity prices in the European Union increased by an average of 75% over the same period, while in the United States, the rise was less than 50%. In China, a major competitor in silicon and ferroalloys, prices remained relatively stable due to government subsidies and strategic energy policies.
As CEO Marco Levi stated, “We stand ready to work with all stakeholders to find a viable long-term solution that preserves jobs, supports communities and allows this strategic sector to continue contributing to the local economy.”
For Ferroglobe, electricity now constitutes over 50% of total production costs—surpassing the selling price of its products and leading to negative profitability margins. CEO Marco Levi commented, “Energy costs have reached levels that render continued operations financially unviable despite decades of investment, industrial commitment and continuous efforts to sustain production.”
The crisis has drawn concern from multiple quarters. Eskom, South Africa’s power utility, has acknowledged the severity of the issue. An Eskom spokesperson noted, “We are aware that industrial consumers like Ferroglobe are under immense pressure. We are actively engaging with stakeholders to explore tariff adjustments that could preserve jobs and maintain industrial output.”
“The construction of competing facilities in Botswana and Mozambique, with electricity prices up to 60% cheaper, has given those producers a distinct competitive advantage,” said analyst Tumi Molefe.
Government officials have also weighed in. The Department of Trade, Industry and Competition stated, “We are evaluating special electricity tariffs for strategic sectors and considering broader reforms to support industrial competitiveness.”
Employees are feeling the impact firsthand. One worker at the eMalahleni smelter shared, “The uncertainty is affecting everyone. We worry about our families and what the future holds if these cost issues are not resolved.”
Industry analysts point out that South Africa’s high electricity prices have eroded its position as a low-cost producer, with several companies relocating manufacturing to neighbouring countries where power costs are significantly lower. “The construction of competing facilities in Botswana and Mozambique, with electricity prices up to 60% cheaper, has given those producers a distinct competitive advantage,” said analyst Tumi Molefe.
Ferroglobe’s situation is not unique. The global ferroalloys sector has seen similar struggles where energy pricing volatility has impacted profitability. For example, European smelters have negotiated long-term contracts with public utilities to secure stable pricing, while Chinese producers benefit from state-backed rate caps and direct subsidies. In contrast, South African producers operate in a deregulated environment with limited recourse against price hikes.
The company’s history in the region includes significant investments: acquiring the Polokwane Silicon Metal smelter in 1997 and eMalahleni Ferrosilicon smelter in 2008, investing in five quartz mining operations, and becoming the largest charcoal producer in Southern Africa. Despite these achievements, continued operations have become unsustainable.
Stakeholders are exploring several strategies to address the crisis: Government Intervention: Proposed measures include extending special tariff rates to strategic industries, tax incentives, and subsidised energy schemes. A similar approach helped revive ferrochrome operations in Zimbabwe after tariff reductions were introduced. Alternative Energy Sources: Companies are considering investments in renewable energy, such as solar and biomass, to reduce dependence on grid electricity. Ferroglobe has already expanded its charcoal division, hinting at possible bioenergy integration. Collective Negotiation: Industry associations are lobbying for sector-wide tariff reforms, citing successful negotiations in Europe where smelters secured bulk energy contracts at reduced rates. Operational Optimisation: Some producers have implemented energy-saving technologies and adjusted production schedules to mitigate peak tariff impacts. Despite the ongoing talks, the immediate outlook remains uncertain. Ferroglobe has warned that, without confirmation of reduced tariffs by April 1, retrenchments will begin, with dismissals expected from June. The cessation of operations would affect not only Ferroglobe’s 275 permanent employees, 288 contractors, and approximately 3,900 indirect workers, but also ripple across the broader value chain—impacting an estimated 60,000 jobs in its charcoal division.
Ferroglobe’s predicament underscores the urgent need for structural solutions to South Africa’s industrial electricity pricing. The company’s consistent investment over nearly three decades has supported communities and contributed to the local economy, but no business can withstand such extreme cost escalation. As CEO Marco Levi stated, “We stand ready to work with all stakeholders to find a viable long-term solution that preserves jobs, supports communities and allows this strategic sector to continue contributing to the local economy.” The coming weeks will be critical in determining whether a sustainable path forward can be found, or if South Africa will lose a cornerstone of its ferroalloys industry.
