The Glencore-Merafe chrome venture is forging ahead with plans to retrench about 2,500 workers over the next few weeks in a move that deals a blow to the ANC’s economic turnaround plan, which identified the rebuilding of the chrome sector as a crucial cog.
The venture on Tuesday said several engagements with the government to avert the retrenchment proceedings had failed.
“Despite its engagement with the government, no viable interventions or solutions have been presented to address the severe challenges [affecting] our ferrochrome operations, the most pressing requirement being the provision of a competitive energy tariff,” the venture said in a statement.
“As a result, in the absence of any viable solution from the government, retrenchments will commence within the next couple of weeks alongside the placing of the Wonderkop and Boshoek smelters on care and maintenance.
As a result, in the absence of any viable solution from the government, retrenchments will commence within the next couple of weeks alongside the placing of the Wonderkop and Boshoek smelters on care and maintenance.
— Statement
“This would leave only the Lion smelter operational. These operations have long been a cornerstone of local economic activity. The potential closure of these smelters will result in significant job losses and have a devastating impact on employees, their families and the surrounding communities.”
SA’s ability to beneficiate chrome ore into ferrochrome, an indispensable metal in the production of stainless steel, has all but come to a halt, costing the fiscus billions of rand in lost revenue with thousands of jobs.
This could have been avoided had the government listened to multiyear concerns from the industry that factors such as astronomical energy costs had rendered smelting operations unviable, according to Glencore Alloys CEO Japie Fullard, who told Business Day in September that SA was running out of time to save the situation.
SA has 70%-80% of the world’s chrome ore reserves. However, its declining competitive position in the global ferrochrome market has led to a reduction in production capacity.
SA, which has the world’s largest chrome ore reserves, has surrendered its competitive advantage to China, which has taken the leading role in the beneficiation process.
From about 2012, the Chinese began building huge ferrochrome plants in China and later in Mongolia, with their electricity 50% cheaper than SA producers.
The cost of electricity has risen more than 800% since 2007. High energy costs are damaging SA’s mining industry, which accounts for about 8% of GDP, according to a study by Boston Consulting Group. The study found that SA’s energy costs are the fourth highest among similar mining jurisdictions.
Glencore and Merafe earlier this year suspended the venture’s smelting operations at Boshoek and Wonderkop after the completion of the business review process, commencing legal processes that might lead to job losses.
The venture also temporarily suspended operations at the Lion smelter to allow for scheduled annual maintenance and planned rebuilds.
“We have also taken the time to review the alloys division and will be right-sizing some departments. The venture remains committed to transparent communication and will continue to engage with all stakeholders during this critical period,” the venture said.
“It is imperative that all stakeholders acknowledge the gravity of this situation and collaborate urgently to develop sustainable solutions that preserve employment and support affected communities.”
In recent months, the government has moved to extend negotiated pricing agreements 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.
The ANC’s 10-point economic action plan, adopted by its national executive committee earlier this month, aims to unlock more value from the chrome industry through trade tools and industrial energy relief.
Preferential electricity tariffs, export controls and infrastructure investment in the chrome industry are among the policy approaches outlined in the plan.
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