CLARENCE TSHITEREKE: Closing smelters undermines SA’s critical minerals strategy 1042

A principal objective identified in South Africa’s National Development Plan 2030 is the promotion of industrial growth. The expansion of mineral resource beneficiation plays a significant role in supporting and advancing industrial growth.

SA’s critical minerals strategy, released in May 2024, underscores the primacy of reviving smelting capacity. This matters because South Africa holds about 80% of the world’s chrome ore reserves, providing a significant edge in producing ferrochrome — a key component in making stainless steel used in the manufacturing of cars, industrial machinery and construction.

The core issue is the cost and reliable supply of baseload electricity for the production of ferrochrome in energy-intensive smelters. The benefit of holding the largest endowment of chrome reserves is diminished by substantial increases in electricity tariffs over the past 20 years. Industrial clients such as mines, smelters and refineries collectively account for 30% of Eskom’s electricity consumption. Since 2007, electricity tariffs have increased by more than 800%, outpacing the rate of inflation by a considerable margin. Increasing electricity tariffs have eroded the competitiveness of the ferrochrome industry.

Consequently, the production costs of ferrochrome in South Africa have risen to levels at which countries like China are able to produce ferrochrome more economically, despite relying heavily on imported chrome ore. In 2023 South Africa produced 19.7-million tonnes of chrome ore, 47.8% of which was exported to China alone. As China brings a substantial amount of new ferroalloy production capacity online, it will gain greater influence over prices, which in turn could make South Africa’s production less competitive.

Operational smelters offer significant economic and strategic advantages, including vertical integration and revenue diversification through by-products, and enhanced supply chain control. 

By redeveloping its smelting and refining infrastructure, South Africa could capture more value from critical mineral resources, create hi-tech jobs, and become a key player in supply chains for technologies like electric vehicles and renewable energy.

During the metallurgical extraction of ferrochrome from chromite ore, smelters are able to generate critical minerals as byproducts. For instance, the main byproduct of chrome smelters producing ferrochrome is ferrochrome slag, which consists mainly of aluminium, silicon and magnesium oxides. Beyond chrome, cobalt is often a byproduct of nickel and copper smelting metallurgical processes.

In 2024 the average ferrochrome production cost per tonne was $119 in South Africa, compared to $103 in China. While South Africa was once a global leader in ferroalloy production, the industry is now confronting a major crisis as a result of electricity supply issues. The chrome industry is important because it contributes R43bn to South Africa’s economy and supports substantial household incomes, with 21,842 people employed in 2023.

In June the government responded to industry pressures by approving discounted electricity tariffs for smelters. For instance, of the 24 smelters Samancor owns, only two are in operation. Glencore, which owns 22 smelters, has shut down its Boshoek and Wonderkop facilities for annual maintenance and rebuilds, leaving no smelters operating at present.

Overall, in the ferroalloys industry, out of 69 smelters, only five were operational in November 2025. South Africa’s competitive advantage has traditionally been derived from substantial mineral resources, complemented by a strong processing capacity. Control over both mining and processing made South Africa a major force in international metallurgical supply chains, leading to significant export earnings, job creation and advances in technology.

Today, rising costs of operating smelters, weak prices and transport logistical constraints are reshaping the sector, with more producers shifting towards raw chrome ore exports. The South African government recently proposed a raw chrome ore export tax of 25% aimed at stimulating local beneficiation and the restart of idled ferrochrome plants. This is perhaps a little too late — there are doubts over whether the proposed tax can meaningfully reverse the industry’s decline.

The proposed raw chrome ore export tax allows the state to monitor more closely both who is exporting it and the quantities involved. However, if it succeeds, it could reshape the economics of South Africa’s chrome industry by encouraging companies to reassess investment plans and operational strategies. Conversely, such a levy may sharply cut South Africa’s chrome export volumes, especially to major markets like China, and could result in upstream job losses at chrome mines.

The industry’s future will depend on its ability to adapt to changing market conditions, improved efficiency and lower costs. At present, Glencore and African Rainbow Minerals are running a pilot test of SmeltDirect at one of Glencore’s smelters. This method uses up to 70% less electricity compared to conventional smelting techniques, leading to substantial reductions in both operating costs and dependence on Eskom. If the pilot fails and chrome ore export tax or high electricity tariffs persist, the mines may reduce operations, change priorities and exit the market with associated investment collapse.

Though South Africa is still the world’s second-largest producer of processed ferrochrome after China, its output is decreasing due to unreliable and costly electricity as well as increasing expenses. This trend directly contradicts the government’s goals for industrial expansion. South Africa’s capacity to maintain value-added mineral processing operations is contingent on the development of sustainable solutions to the power crisis, which has resulted in extensive shutdowns and poses significant risks to employment.

Though South Africa ranks among the leading producers of various minerals, its mineral value chains are primarily upstream, focused on extraction and export with limited beneficiation and value addition. Without adequate and affordable power, mineral beneficiation does not present a viable business case in South Africa. This undermines the potential success of South Africa’s Critical Minerals Strategy, which is predicated on promoting sustainable extraction of selected critical minerals but also balancing limitless exportation of raw ore with domestic imperatives for processing and beneficiation.

Saddled by deficient processing and manufacturing capacities, limited mineral beneficiation restricts the acquisition of higher value-added advantages from mineral endowments.

There is an urgent need for strategic interventions to restore the competitiveness of South Africa’s ferrochrome and ferroalloy sector by addressing baseload electricity supply, tariffs and export market constraints, while unlocking value addition through incentivising local stainless-steel production.

If urgent, pragmatic and co-ordinated efforts are not undertaken, South Africa may forfeit its strategic advantage in ferrochrome and ferroalloy beneficiation and streamlined supply chain optimisation within downstream industries — sectors that have significant potential to generate added value and employment at a time when the need is greatest.