The fate of South Africa’s ferrochrome industry could well be decided on Feb. 28 when Eskom finalizes its new electricity rates. And, also looks certain that Eskom will be forced to extend its power buyback program to South African charge chrome smelters through the end of 2012.

 

The ferroalloy producers say they are already suffering and that any proposed increase would doom their industry. “Forget about building a new smelter,” one producer explained. “It is just about keeping the existing smelters going.” Also, Eskom’s decision affects the country’s exports of chrome ore that will increase if the power rate rises.

 

While the users want Eskom to modernize its generating plants, they don’t want to pay for the improvements with higher electricity tariffs. Instead, the users want Eskom to borrow the money. However, Eskom currently has a debt of ZAR190-billion and that will increase to ZAR350-billion by 2016 after it completes its modernization program-assuming it is completed on time which is exceedingly unlikely. The problem is that government will only backstop Eskom for ZAR350-billion.

Eskom has declared a red alert for its retail customers “due to a high number of technical problems being experienced on our aging generation plants? Eskom is currently using its emergency reserves such as gas and hydro power stations and buying back power from large industrial users?