ArcelorMittal South Africa (Amsa), which paid R3.4bn in energy costs in the 2025 financial year, says it has left no stone unturned to secure significant tariff relief from Eskom, accusing the utility of dragging its feet on a measure critical to its survival.
The embattled steel producer reported a loss of R3.5bn in the year ended December from a R5bn loss in the prior year and said that despite intervention from the National Energy Regulator of South Africa (Nersa) and seeking assistance of Eskom CEO Dan Marokane, the energy player has not played ball in its relief application.
“We continued to pursue a negotiated pricing agreement (NPA) with Eskom, consistent with our longstanding efforts to secure a more sustainable electricity cost structure. Following limited progress with Eskom, we sought the intervention of Nersa,” Amsa said in the group’s annual report.
“In September, Nersa ruled in our favour and instructed Eskom to engage with us in formal negotiations. Despite this directive, Eskom has been slow to participate meaningfully in the process. As a result, we escalated the matter to CEO level to ensure negotiations advance constructively and within reasonable timelines.”
The energy costs paid by Amsa nearly resemble the R3.6bn it paid in salaries, wages and benefits in the year.
South Africa’s high energy costs, which have battered consumers and high-intensity energy users, have come to the fore over the past few years, with companies queuing at Eskom’s door seeking relief to stay afloat.
Eskom recently granted chrome majors Samancor and the Glencore-Merafe joint venture a 54% tariff reduction, following protracted negotiations, with the final decision resting with Nersa, pursuant to a public consultation process.
Eskom has also asked Nersa to grant Transalloys, the country’s last remaining manganese smelter, temporary tariff relief.
Transalloys’ plant in Mpumalanga is in peril, weighed down by hefty electricity prices, with the jobs of hundreds of direct employees and subcontractors on the line, with similar difficulties playing out in the ferrochrome and other industries.
Eskom’s move for the chrome industry has given Amsa hope that it will also get relief.
“While there has been no progress on achieving an NPA with Eskom, we believe that the recent granting of temporary tariff relief to two ferrochrome producers bodes well for our efforts to obtain a favourable NPA,” Amsa said.
“We also intend working with government to grow the beneficiation of local mineral resources by cultivating junior miners. Government is increasingly open to such initiatives, including, we believe, the imposition of local consumption quotas.
“Such quotas will boost raw material beneficiation and advance regional industrialisation. We also began working with government on strategies to support ferro-alloy manufacturers, who struggled to survive in a context of soaring electricity prices.”
Amsa has closed down its unprofitable long steel business, with the group still engaged in high-level talks with the Industrial Development Corporation over a potential transaction.
Such quotas will boost raw material beneficiation and advance regional industrialisation.
— AMSA
The steel major also used the annual report to decry the “persistently poor delivery performance” by Transnet Freight Rail (TFR), which it said adds considerably to its cost base and results in lost production and sales.
It said that in the year under review, it received, on average, 275 loads of raw materials by road per day and dispatched an average of 170 daily truckloads of final products to customers.
“We need an appropriately enabling environment to be created by government. To date, no relief has been forthcoming on onerous rail and electricity costs, and such relief against unfair steel imports as was implemented remains woefully inadequate and out of step with measures implemented across the world,” Amsa CEO Kobus Verster said in his annual letter to shareholders.
“As I described, we were ultimately disappointed with the outcomes from innumerable engagements with government and state-owned enterprises on interventions that, if implemented, could have substantially boosted our performance and prospects, to the extent of saving Newcastle from what became the inevitable mothballing of this proud facility.
“We must accept that these missed opportunities are water under the bridge. We now look with renewed confidence to the government following through on its stated intentions to prioritise localisation, import control, combat illicit trade and ensure a fair and competitive playing field for all.”
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