Panic in the chrome sector set in on Tuesday as Eskom asked for more time to deliberate on the finer details of the discounted electricity tariff for the sector announced in January to keep smelting furnaces afloat.
Eskom sought a further extension in pronouncing its decision on the terms and conditions it has attached to its earlier decision to more than halve the energy costs of the Glencore-Merafe chrome venture and Samancor in a bid to level the playing field with China.
The proposed 62c/kWh tariff has been approved in principle, to only be stalled in a process to finalise the associated terms and conditions “to ensure that the commercial arrangements are workable, financially sustainable and operationally viable for both Eskom and the venture,” according to Glencore
Business Day understands that Eskom held a board meeting three weeks ago to discuss the issue. The successful conclusion of the discussions will cut the cost of electricity they have been using to smelt raw chromite ore into a processed, beneficiated export by more than half.
The venture last week said it was awaiting internal governance approvals, with the power producer having asked for a one-week extension to conclude its processes — extending the retrenchment process to Tuesday.
However, Eskom sought further extension to weigh the counterproposal presented by the venture.
“As a result of the continued engagements with Eskom and the South African government … shareholders are hereby advised that, at Eskom’s request, the Glencore-Merafe Chrome Venture has agreed to a further extension of the termination date to April 9 2026,” the venture said.
Glencore warned last month that if the revised proposal was not submitted to the National Energy Regulator of South Africa (Nersa) by March 31, the company would proceed with retrenching 2,500 workers as originally planned, a decision that it has now delayed after Eskom asked for a week’s extension last week.
The proposed discount aims to revitalise South Africa’s ferrochrome smelting sector by levelling the playing field with China.
“Eskom remains fully committed to the 62c/kWh tariff support for the two smelters. Our priority is to ensure the agreement is operationally viable and financially sustainable for both Eskom and the smelters. This one-week extension allows us to complete the necessary governance procedures to ensure the final agreement provides all parties with certainty during the contracting period,” the Eskom spokesperson said.
South Africa’s ferrochrome beneficiation capacity has dwindled over the years, largely due to a surge in electricity prices, which have shot up more than 800% since 2007.
This has led to only 11 of the nation’s 66 smelting furnaces being operational despite the country’s having the largest reserves of chrome ore in the world, ceding beneficiation of the mineral to China.
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