Eskom has formally requested that the energy regulator approve an interim tariff of 87c/kWh for Samancor Chrome and the Glencore-Merafe Chrome Venture as a provisional measure to support smelter operations while discussions continue for a long-term solution targeting a reduced tariff of 62c/kWh.
Additionally, Eskom has asked the National Energy Regulator of South Africa (Nersa) to extend by 12 months the waivers related to take-or-pay obligations under negotiated pricing agreements (NPAs), originally secured by both companies last year and effective from 2024. These agreements require ferrochrome producers to fulfill at least 70% of their contracted volumes—a condition rendered unsustainable due to production suspensions at several smelters arising from diminished competitiveness.
Nersa granted six-month waivers in August after hardship was declared by Samancor and Glencore-Merafe regarding the NPAs; these waivers are set to expire at the end of January.
Gugulethu Dumakude of Eskom Distribution acknowledged that the proposed 87c/kWh tariff is insufficient for ferrochrome producers to resume production at expected levels under the NPA, but noted it would provide a modest increase in consumption from current levels. She added that this interim tariff, combined with the take-or-pay waiver, would offer crucial flexibility for Eskom and the Department of Electricity and Energy to collaborate on establishing a more sustainable tariff framework for the ferrochrome industry.
Nellis Bester, Chairperson of the Ferroalloy Producers Association, stated that a 62c/kWh tariff is necessary for the industry to restart operations and avert Section 189 retrenchments initiated by various ferroalloy companies, including those outside the ferrochrome sector. He further advocated that any solution be inclusive of manganese, silicon, and vanadium smelting operations, all of which face significant challenges due to cumulative electricity price increases.
Bester highlighted that only four of South Africa’s 48 ferrochrome smelters, and four out of 19 other ferroalloy smelters, are currently operational. He emphasized, “Electricity now constitutes between 40% and 60% of total production costs in the ferroalloys sector. Internationally competitive electricity tariffs are essential to sustain the sector,” warning of potential widespread deindustrialisation and job losses if local minerals beneficiation cannot be supported through appropriate pricing.
Theo Morkel, General Manager of Transalloys, reinforced this perspective by providing a cost analysis showing that, even under its NPA with Eskom, electricity represents $634 per ton of silicon manganese produced, exceeding international benchmarks of $147 to $338 per ton. Morkel supported immediate interim tariff relief for Samancor Chrome and Glencore-Merafe Chrome Venture, and stressed that similar measures should be extended across the broader ferroalloys sector, where closures and employment risks persist.
Tengela Tengo, Trade and Industrial Coordinator for the Congress of South African Trade Unions, also endorsed the proposed relief, cautioning that approximately 300,000 direct and indirect jobs are at risk if smelter closures proceed. However, he recommended that Nersa grant approval contingent upon a moratorium on further retrenchments by affected companies.
No timeline was specified for Nersa’s decision on the application, though Eskom indicated that approval is needed by the end of February at the latest.
