Glencore confident Eskom will slash power tariff for smelters

Glencore CEO Gary Nagle said he is confident that Eskom will meet the group’s demand for a 54% tariff reduction by month-end, levelling the playing field with Chinese ferrochrome smelters.

“We sit here confident that we will get a very competitive tariff from the government,” Nagle told journalists at a media conference on Wednesday.

“We’ve had terrific interaction with the government, with a very supportive president and very supportive ministers across the administration, including Dan [Marokane] at Eskom,” he said.

The comments come as the February 28 deadline for Eskom and Glencore to identify a workable energy solution for the Lion, Boshoek and Wonderkop ferrochrome smelters looms large.

Last month, the country’s energy regulator granted the smelters an interim tariff of 87.74c per kilowatt hour for 2026, which is 35% lower than the R1.36 rate they had faced previously.

Glencore’s precedent-setting request, if granted, could result in a number of distressed heavy consumers of Eskom’s power also joining the queue for similar relief.

Glencore had already begun handing out retrenchment notices in late 2025 to the smelters’ 2,500-strong workforce, blaming the country’s uncompetitive electricity costs for a sector-wide affordability crisis.

While the 87.74c compromise was enough to get the Lion smelter up and running in the short term, the commodity trading giant said all three operations require a 62c tariff to be commercially viable over the long term.

“We’re not even thinking about the possibility of not getting a 62c tariff — we believe we’ll get that tariff; we believe we’ll get it before the end of February, and we look forward to restarting both Boshoek and Wonderkop smelters,” said Nagle.

The smelters’ demands may be a subject of debate on the sidelines of the national budget on February 25, with some sort of government funding mechanism needed to foot the bill if Eskom agrees to give the ferrochrome sector special treatment.

Eskom indicated in its application for an 87.74c tariff that the shortfall between the approved tariff and the proposed reduced tariff would be funded by the department of electricity & energy through a dedicated government support process, which the utility expected to be finalised by March.

Glencore estimates that South Africa holds about 80% of the world’s known chrome reserves, but high electricity costs, which have surged more than 900% since 2008, have seen it surrender the downstream smelting process to China.

China, which started constructing huge ferrochrome plants at home and in Mongolia from about 2012, has gradually taken South Africa’s share of the ferrochrome market by offering electricity that is more than 50% cheaper than in South Africa.

Glencore Alloys CEO Japie Fullard told media that as long as Eskom provides the tariff relief needed to make the operations economically viable, the group will also work on innovative solutions to keep the smelters competitive in a challenging global environment.

“[A 62c tariff] will definitely put us back into the ring and give us a fighting chance, but it’s just the start,” said Fullard.

“We are also looking at making sure that we are competitive, not only from an electrical perspective but across the company and in terms of investments and technology.

“As minister Gwede Mantashe said, it’s not just the government that must bring their side [of the bargain] — we, as the company, must do the same.”

Eskom’s ballooning electricity prices have forced more than half of South Africa’s 59 chrome furnaces to close in recent years, according to mineral & petroleum resources minister Gwede Mantashe.

Nersa’s Willibrod Majola said last month that South African smelters faced a near-death experience if they did not get financial relief in the form of tariff relief.

He estimated that the 35% reduction, which was also applied to Samancor, is estimated to have saved more than 24,000 jobs across the value chain.

The price of Eskom’s power has elicited widespread concern across the mining sector over the past year.

Australian-listed South32 has blamed failed negotiations with Eskom for the closure of its huge Mozambican smelter, which will see about 25,000 workers retrenched next month.

Arcelor Mittal has also cited high electricity costs as a key reason behind its decision to wind down its long steel business, putting 3,500 jobs in KwaZulu-Natal and Gauteng on the line.