South Africa plans to offer an electricity price incentive of 87¢/kWh for ferrochrome smelting.

Eskom has applied to the energy regulator for approval of an interim electricity tariff of 87¢/kWh for Samancor Chrome and the Glencore-Merafe chrome venture. This is a temporary measure aimed at maintaining smelter operations while parties continue to negotiate a longer-term solution, with the goal of further reducing the tariff to 62¢/kWh.

The utility also requested that the National Energy Regulator of South Africa extend the "take-or-pay" obligation exemption granted to the two companies last year by an additional 12 months. This exemption pertains to obligations under pricing agreements negotiated with Eskom, which took effect in 2024. These agreements stipulate that ferrochrome producers must fulfill at least 70% of their contracted electricity volume; however, this condition has become unattainable due to the industry's loss of competitiveness and the shutdown of multiple smelters. In August last year, Samancor Chrome and the Glencore-Merafe chrome venture cited operational difficulties caused by these clauses, prompting NERSA to approve a six-month exemption, which is set to expire at the end of January.

Gugulethu Dumakude of Eskom's distribution division acknowledged that the interim tariff of 87¢/kWh is still not enough to restore ferrochrome producers to the production levels envisaged in the pricing agreements, but it would help companies slightly increase their electricity consumption from current levels. She added that this interim tariff, combined with the "take-or-pay" obligation exemption, would also create buffer space for Eskom and the Department of Mineral Resources and Energy to finalise a more sustainable electricity pricing solution with the ferrochrome industry.

Nellis Best, Chairman of the South African Ferroalloy Producers Association, confirmed that the industry needs an electricity tariff of 62¢/kWh to restart production and avoid the Section 189 retrenchment processes already initiated by several ferroalloy enterprises, including those outside the ferrochrome sector. Therefore, he also argued that the final negotiated solution should not be limited to the ferrochrome industry but should extend to manganese, silicon, and vanadium smelters—all of which are facing operational difficulties due to "escalating electricity prices."

Best pointed out that only 4 of South Africa's 48 electric furnace ferrochrome smelters are currently operational; similarly, only 4 of the 19 smelters in other ferroalloy sectors remain in production. He stated, "Currently, electricity costs account for 40% to 60% of the total production costs in the ferroalloy industry. To sustain the industry, it is crucial to establish an internationally competitive electricity tariff." He also warned that without an electricity pricing policy supporting local mineral beneficiation, South Africa faces widespread deindustrialization and job losses.

Theo Morkel, Managing Director of South African Cross-Alloys, further corroborated this view, sharing cost comparison data indicating that, even under the company's pricing agreement with Eskom, the electricity cost for producing SiMn is as high as $634/mt, far exceeding the international benchmark—where international SiMn production electricity costs range from as low as $147/mt to a maximum of $338/mt. Consequently, Morkel expressed support for immediately implementing the interim tariff relief for Samancor Chrome and the Glencore-Merafe chrome venture but stressed that the rest of South Africa's ferroalloy industry equally urgently requires similar relief policies, as these sectors also face plant closures and unemployment crises.

Tengo Tengela, Trade and Industry Coordinator of the South African Federation of Trade Unions, also supported the electricity tariff relief application, warning that if smelters are forced to shut down, approximately 300,000 direct and indirect jobs would be at risk. However, while calling on NERSA to approve the application, he urged that it be conditional on the relevant enterprises suspending further retrenchment actions.
Currently, the National Energy Regulator of South Africa has not yet announced a decision timetable for this application, but Eskom has stated that the relevant approval must be issued by the end of February at the latest.