Merafe Resources has begun the retrenchment consultation process with employees at its Boshoek and Wonderkop smelters in the North West, indicating that closures are on the horizon.
Thousands of jobs and billions of rand of export earnings are on the line if the smelters, which were suspended earlier this year thanks largely to unsustainable electricity costs, are closed down.
The smelters are owned by the Merafe-Glencore joint venture, which has already closed 10 of its 22 furnaces over the past four years, resulting in the loss of 1,800 jobs.
In a statement on the JSE’s news service on Monday, Merafe said the joint venture had commenced a consultation process in terms of section 189 of the Labour Relations Act.
Earlier this year, Glencore said that high electricity prices had made it more viable to export raw chrome ore out of SA than to smelt it into ferrochrome locally. The joint venture produces about 2.3-million tonnes of ferrochrome a year, or roughly a third of SA’s annual exports of the ferroalloy.
Merafe said the venture was also rethinking operations at its Rustenburg and Lydenburg smelters, which have already been placed on care and maintenance, and was looking for ways to “streamline opportunities within the mining division”.
The venture’s Lion smelter, which suspended ferrochrome production earlier this year to conduct maintenance, was also being evaluated — a process that may see the unit halve its operating capacity.
“The consultation process is as a result of the continuing economic pressures facing the SA ferrochrome industry and the lack of sustainable industry solutions that could alleviate the pressures in the near- to medium-term,” said the group.
In recent months, the government has proposed sweeping policy reform to shelter the local industry from double-digit electricity tariff hikes and tough competition from China, which now smelts more than 70% of the chrome ore SA digs out of the ground.
South32’s Hillside smelter in Richards Bay made headlines earlier this year when Open Secrets reported that the operation had received a significant and confidential discount on its electricity bill from Eskom, resulting in savings of R92bn over the preceding decade.
With the industry in crisis, the government has moved to extend negotiated pricing agreements (NPAs) to SA’s alloy and ferrochrome industries, allowing these companies to negotiate their electricity prices in a bid to promote beneficiation in these energy-intensive sectors.
In the meantime, however, another smelter closure in KwaZulu-Natal, announced by SA mining company Assmang last month, has resulted in 600 workers being retrenched .
In neighbouring Mozambique, South32 has decided to put its Mozal aluminium smelter on care and maintenance next year, putting about 5,200 jobs on the line, with as many as 22,000 jobs indirectly at risk of being lost.
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