Nersa weighs emergency power price relief to save ferrochrome smelters

Stephen Grootes speaks to Nellis Bester, chairperson of the Ferroalloy Producers Association, about the deep strain on South Africa’s ferroalloys sector as electricity costs push smelters to the brink.

Listen to the interview in audio player below. 

South Africa’s energy regulator, Nersa, is considering a temporary electricity price cut for struggling ferrochrome smelters as part of efforts to prevent further plant closures and job losses.

Eskom has asked Nersa to approve an interim electricity tariff of 87 cents per kilowatt-hour (kWh) for Samancor Chrome and the Glencore-Merafe Chrome Venture.

This temporary price would apply while negotiations continue on a longer-term solution, which aims to reduce the tariff further to 62c/kWh, a level the industry says is needed to make operations viable.

Eskom acknowledged that the proposed 87c/kWh tariff is still too high to allow smelters to restart production at full capacity. However, Eskom said it would help increase electricity use slightly and give both the utility and government time to work on a more sustainable pricing solution for the sector.

Speaking to Stephen Grootes on The Money Show, Nellis Bester, chairperson of the Ferroalloy Producers Association says the industry needs a tariff of 62c/kWh to restart operations and avoid large-scale retrenchments.

With only four of 48 ferrochrome smelters and four of 19 other ferroalloy plants currently operating, the industry warns that without internationally competitive power pricing, widespread closures, retrenchments, and a collapse in local minerals beneficiation are imminent.

He added that any final electricity pricing solution should not be limited to ferrochrome producers alone, as other ferroalloy producers, including those smelting manganese, silicon and vanadium are facing similar financial pressure due to years of steep electricity price increases.

"This industry, not only ferrochrome but the rest of the beneficiation industry in South Africa has made it clear through various simulations that we've done that the break-even point is 62cents, and this industry cannot be maintained at this 87 cents."

- Nellis Bester, chairperson - Ferroalloy Producers Association

"We all indicated that we are happy that there is an interim relief for the chrome industry, it can certainly alleviate some of the pain and the hardship, but it's not going to take the problem away, and therefore we were supportive of that. We were vocal we need to extend this to the other industries..."

- Nellis Bester, chairperson - Ferroalloy Producers Association

"I'm really not sure who's going to the bill of the 87 cents. This is the additional 35% reduction...it is the consumer or government who's going to have to stand in for this, and obviously this is not sustainable."

- Nellis Bester, chairperson - Ferroalloy Producers Association 

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