South Africa’s effort to rescue parts of its smelting sector is running into a bigger problem. While ferrochrome producers have dominated electricity tariff relief talks, companies outside chrome say they are being left to run out of cash as the wider beneficiation base continues to weaken.
That fault line sharpened on Monday after Ferroglobe’s South African unit warned it may be forced to halt its remaining furnace operations unless reduced electricity tariffs are extended to it before Wednesday, arguing that power costs have become unsustainable and that continued production is no longer financially viable.
The company said electricity prices in South Africa have risen by 900% since 2007 and now account for more than half of its total production costs, leaving it unable to compete with producers in jurisdictions where power is much cheaper. A nearly 9% Eskom tariff increase due to take effect on Wednesday will further deepen losses, it said.
Without relief, the company said it would have no alternative but to stop production and widen the section 189 retrenchment process for its remaining staff, with dismissals expected to take effect in June. The warning places renewed attention on the strain facing South Africa’s energy-intensive smelting industry where companies say policy support has become too narrow, too slow and too selective to prevent further industrial erosion.
At the centre of the dispute is a growing industry complaint that recent intervention efforts have focused largely on ferrochrome, while other smelters producing silicon and manganese alloys and other beneficiated products remain outside the immediate support net.
“It was uniquely for ferrochrome, and that is where the problem lies,” Nellis Bester, Ferro Alloys Producers Association chair and geographical leader for Ferroglobe South Africa, said in an interview with Business Day on Monday.
“We’ve been talking about saving the beneficiation sector since last year. The expectation was that the ferrochrome portion would have been sorted out by the end of last year, allowing for discussions with the rest of the industry with a view to saving all those affected.”
Instead, he said, delays in finalising a workable framework for chrome producers have effectively held up the rest of the sector.
“It gives the feeling that everybody is waiting to see what is happening with ferrochrome before we start talking and finding a solution for the rest of the industry,” he said.
Furnace stoppage
Bester said the immediate operational step under consideration is the stoppage of Ferroglobe’s last furnaces still running in South Africa, rather than an instantaneous shutdown of every part of the business. But he warned that the effect would quickly spread through the company’s broader operating chain.
He said the company will begin the section 189 process in early April, triggering a 60-day consultation period, while still hoping for some form of intervention. “If there’s nothing, then it’s going to be problematic. Then we’ll definitely have to look at shifting production completely out of the country,” he said.
Ferroglobe said in its statement that while it directly employs 275 permanent staff, it also relies on 288 long-term contractors and about 3,942 indirect workers, as well as an estimated 60,000 indirect workers linked to its charcoal division.
Bester said much of that wider activity exists to support smelting operations. “If you stop the furnaces, all of that activity stops,” he said, referring to the group’s charcoal operations, which he described as among the largest in the country. “The spin-off effect is in the supply chain. And there we have the biggest consequence where employment is desperately needed.”
Ferroglobe’s South African footprint includes the eMalahleni ferrosilicon smelter, five quartz mining operations and a large charcoal production business. Its Polokwane silicon metal smelter, which the company restarted in 2022, was returned to hot care and maintenance in 2024 after prolonged pressure on costs and market conditions. That earlier move had already triggered a retrenchment process that affected more than 300 employees, contractors and service providers.
Silicon metal
For decades, Ferroglobe was the only African producer of silicon metal, a material used in aluminium, chemicals, solar technology and defence applications, while ferrosilicon remains an input into steel, stainless steel and foundry production.
Bester said Ferroglobe supplies South African industrial users, including steel and stainless steel producers, making its viability relevant not just to mining or smelting but to domestic manufacturing capacity more broadly.
That has sharpened the broader industry argument that South Africa is not dealing with a “ferrochrome problem” alone but with a much wider energy-intensive beneficiation crisis.
Independent electricity pricing specialist Deon Conradie said the debate is exposing the limits of a support model that has historically been built around special treatment for a handful of strategic electricity users, rather than a coherent economy-wide industrial framework.
“The whole environment has now shifted from special-case support to a system-wide affordability crisis,” Conradie said.
“The question is whether you can still justify this support for a few when so many are battling at the same time.”
That, he said, is why the political and policy tension regarding negotiated tariff support has intensified.
Legacy of special pricing
South Africa’s electricity pricing battles with heavy industrial users are not new. During the 1990s and 2000s, Eskom entered into long-term special pricing arrangements with some of the country’s biggest power-intensive producers, particularly in aluminium and ferrochrome, to help absorb excess generation capacity and anchor industrial activity.
But those agreements became politically contentious over time, particularly as Eskom’s financial position deteriorated, electricity shortages emerged and tariff increases accelerated.
Conradie said the basic logic behind those arrangements was once easier to justify: strategic users bought large, steady volumes of electricity and helped spread system costs. But the model also carried a hidden cost.
The trade-off, he said, was that the government viewed those industries as strategically important to exports, beneficiation and industrial jobs. But that logic has become harder to sustain as more of the economy comes under affordability pressure and as Eskom faces rising pressure to recover costs.
“I believe we need a transparent and clear industrial tariff policy framework,” Conradie said. “It must be linked to specific criteria like jobs per megawatt, export value and economic multipliers. There must be time-limited support.” He argued that South Africa’s present approach remains too fragmented and reactive.
Ferrochrome first
The present flashpoint stems from government-backed efforts to keep parts of the ferrochrome industry alive after years of declining smelting competitiveness in a sector where South Africa remains rich in ore but increasingly weak in value-added processing.
But Bester said the focus on chrome has obscured how few non-chrome smelters remain and how vulnerable they now are. “South Africa should now be negotiating commodity-specific solutions across the remaining beneficiation base.”
Bester said a tariff of about 62c per kilowatt hour would restore competitiveness for silicon alloy operations such as those of Ferroglobe, though the precise workable tariff could vary by commodity.
A competitiveness problem
Conradie pushed back against the idea that Eskom alone should be blamed for the sector’s decline.
“I absolutely do not agree with anybody who says it is Eskom’s problem,” he said. “This is a country issue. This is not an Eskom issue.”
He said the state must decide more clearly which industries it intends to preserve, how support should be funded and who should bear the cost. Without that, the burden risks being shifted onto other electricity consumers or onto Eskom’s already stretched balance sheet.
“That distinction matters because tariff support, if not transparently structured, can become politically and economically destabilising. Relief for one group of industrial users may help preserve jobs and exports in the short term, but it can also raise questions about fairness, cost recovery and whether other struggling sectors are effectively being left to subsidise them,” Conradie said.
“The current structure of negotiated support is not sustainable if it continues to place below-cost sales pressure on Eskom without a broader state-led funding framework.”
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