Eskom’s new solution to saving South Africa’s ferrochrome smelters–a task force to study the problem

 

Eskom announced that it finalized a memorandum of understanding with Samancor Chrome and Glencore and government officials to establish a joint multi-task team that will “prioritise developing an intervention that supports industrial competitiveness while ensuring that electricity-pricing solutions do not impose additional burdens on other customers.” The parties agreed to present a proposed solution within three months.

 

NERSA is currently processing an application for an interim tariff adjustment for the smelters. At the same time, government is working on a complementary mechanism to support a more competitive pricing path for the sector, which is expected to be finalized over the next three months. This would be Eskom/Nersa's second "special" low-priced power price to smelters.

 

Once the interim tariff is approved, the smelters have committed to suspend the Sec. 189 retrenchment process and bring about 40% of their furnace capacity back online while the long-term solution is developed under the MoU. (The means that 60% of the capacity will be idled, which in the case of Glencore, running Lion.)

 

Gee is not like that problem hasn’t been around for years and there have been lots of talks on it. The problem is there is still much ferrochrome production–especially in China, which is also the largest ferrochrome users; other countries, like Zimbabwe, are developing their own chrome industries; Western demand for ferrochrome is going down with the production of stainless steel; Eskom needs capex to continue operating; and Eskom can’t support one major user and ignore the rest of the users. And no amount of talking is going to change that. 

 

The bottom line is how much will Eskom and the government will pay to keep the smelter workers employed? And whether the solution will really be long-term or just a stop gap measure?