A historic power discount for South Africa’s ferrochrome sector is one step closer to being finalised as Eskom moves to save thousands of jobs at idled smelters.
On Friday, the state-owned utility asked the National Energy Regulator of South Africa (Nersa) to sign off on a 62c per kilowatt hour (kWh) electricity tariff for Samancor and Glencore’s ferrochrome operations after weeks of urgent talks with the miners.
The announcement brings a wave of relief to the 2,500 workers employed at the Boshoek, Wonderkop and Lion smelters in North West and KwaZulu-Natal, who have been on the brink of job losses since the Glencore-Merafe joint venture threatened sweeping retrenchments last year.
In a statement on Friday, Merafe said the deadline for the deal was now set at May 11, giving Nersa and the broader ferrochrome industry just more than a month to approve it.
Amid a high-stakes tug of war with Eskom over the terms of a tariff deal, the venture has delayed retrenchments five times since its initial layoff threats, the latest of which came early this week.
Aside from the 62c/kWh rate, which Eskom agreed to as part of a broader smelter support package in February, neither party has made public the terms surrounding the deal which have kept them at loggerheads over the past month.
The proposed rate is more than 54% below the R1.36 rate previously paid by the smelters, and well below the interim tariff of 87.74c they have faced since January.
In its latest statement, Eskom said the ball was now in Nersa’s court.
“The dissemination of specific agreement details falls under Nersa’s purview, and the extent of such disclosure will be governed by its internal protocols and regulatory limitations, in line with the need to respect the commercial confidentiality of Samancor Chrome and Glencore–Merafe Chrome.
“The tariff intervention improves Eskom’s liquidity without requiring higher tariffs, additional Eskom borrowing, or further government support. It also provides Eskom with predictable sales volumes for up to the next five years and protects public investments made in the utility, as well as its ability to support reindustrialization and economic growth,” said Eskom.
Energy minister Kgosientsho Ramokgopa estimated in February that the proposed deal would rake in about R76bn in export earnings and add nearly R18bn to Eskom’s bottom line by bringing dozens of other idled smelters online over the next two years.
The negotiated pricing agreement (NPA) proposed by Eskom would offer a five-year, bespoke power deal to smelters on a case-by-case basis, giving preference to the ferroalloys, iron and steel sectors.
This approach allows Eskom to tailor pricing and contractual structures to the specific commercial circumstances of each smelter, ensuring transparency and fairness for all customers, it said.
“The ferroalloy and iron and steel segments are experiencing sustained pressure from global commodity markets, rising input costs and structural competitive challenges, and will be prioritised ahead of other smelter industry sectors.
“For these segments, pricing will be determined through a structured, bottom‑up assessment that takes into account the cost of production, electricity intensity, and exposure to commodity prices. This is not a uniform approach; rather, it allows for tailored pricing solutions specific to each smelter."
Business Day
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