By Olivia Kumwenda-Mtambo and Nqobile Dludla
Bengaluru — Glencore’s South African ferrochrome unit could walk away from talks with the government over a discounted electricity package due to what it sees as unfavourable conditions, an executive said on Thursday.
Glencore has said it requires reduced tariffs to keep its loss-making smelters open and avert job cuts. The government is keen to save the smelters, which employ thousands and are major customers of the state-owned electricity supplier Eskom.
Eskom on February 27 offered the country’s two biggest ferrochrome firms, including the Glencore unit, heavily discounted electricity in a bid to rescue their troubled operations.
The offer, to reduce electricity tariffs from R1.36 to 62c per kilowatt hour, is subject to approval by South Africa’s energy regulator under conditions that are yet to be made public.
But Glencore Ferroalloys CEO Japie Fullard warned the company could walk away from the talks, saying some conditions of the package deal were not acceptable to the company.
At a mining conference in Joburg, Fullard said, “So that means if they do not come to the party, we are going to walk away from the 62c offer.”
Fullard said representatives of the ferrochrome firms were meeting government representatives late on Thursday.
In early March, Glencore deferred layoff procedures at its Ferrochrome unit until March 31 to allow for ongoing negotiations. As many as 1,500 jobs would be cut if no agreement is reached.
Samancor Chrome, the other ferrochrome producer that was offered discounted electricity, has said it is going ahead with plans to lay off workers.
The firm said while the reduced tariff addressed electricity cost pressures, the terms and conditions attached to the offer posed “a threat to the long-term viability of the ferrochrome industry”.
Neither Glencore nor Samancor has disclosed the conditions, as negotiations are ongoing.
South African smelters are battling high electricity costs, which have risen tenfold since 2008, amid growing competition from Chinese producers. Only 11 out of a possible 66 smelters are still operational in the country.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.