Eskom has requested the energy regulator to approve an interim tariff of 87c/kWh in favour of Samancor Chrome and the Glencore-Merafe Chrome Venture as a temporary measure to sustain smelter operations while talks continue in relation to a longer-term solution aimed at further reducing the tariff to 62c/kWh.

The utility has also requested the National Energy Regulator of South Africa (Nersa) to extend, by a further 12 months, waivers both companies secured last year in relation to take-or-pay obligations included in their negotiated pricing agreements (NPAs) with Eskom, which came into effect in 2024.

These stipulate that the ferrochrome producers should honour at least 70% of their contracted volumes; a condition that became unviable when production at several smelters was halted owing to a lack of competitiveness.

Six‑month waivers were approved by Nersa in August after Samancor and Glencore-Merafe declared hardship in relation to the provisions, but these are due to expire at the end of January.

Eskom Distribution’s Gugulethu Dumakude acknowledged that the 87c/kWh tariff was not considered low enough for the ferrochrome producers to resume production at the levels assumed under the NPA, but indicated that it would help increase their consumption slightly from current levels.

She added that the interim tariff, together with the take-or-pay waiver, would also create breathing space for Eskom and the Department of Electricity and Energy to finalise a more sustainable tariff solution with the ferrochrome industry.

Ferroalloy Producers Association chairperson Nellis Bester confirmed that the industry required a tariff of 62c/kWh to be in a position to restart operations and avoid Section 189 retrenchment processes that had been initiated by various ferroalloy companies, including those outside of the ferrochrome sector.

He, thus, also argued that the final solution negotiated should not be confined to the ferrochrome sector and should be extended to companies smelting manganese, silicon and vanadium, all of which were in distress as a result of “compounded electricity price increases”.

Bester noted that only four of South Africa’s 48 ferrochrome smelters were currently operating, alongside only four of the 19 smelters in the other ferroalloy sectors.

“Today electricity accounts for 40% to 60% of total production cost in the ferroalloys sector.

“To sustain the sector, internationally competitive electricity pricing is essential,” Bester said, while warning of widespread deindustrialisation and job losses in the absence of an electricity price that was supportive of local minerals beneficiation.

Transalloys GM Theo Morkel amplified this position by sharing a cost comparison indicating that, even under its own NPA with Eskom, electricity represented $634/t of the cost of producing silicon manganese; well above international benchmarks of between $147/t at the low end and $338/t at the higher end.

Hence, while supporting the immediate implementation of interim tariff relief for Samancor Chrome and the Glencore-Merafe Chrome Venture, Morkel said similar relief also needed to be extended to the rest of the ferroalloys sector, where closures and job losses also loomed.

Congress of South African Trade Unions trade and industrial coordinator Tengo Tengela also supported the application for relief, warning that some 300 000 direct and indirect jobs were at risk should the smelters be forced to close.

However, he called on Nersa to approve the application with the condition that there be a moratorium on further retrenchments by the companies.

No timeframe was given for Nersa’s decision in relation to the application, but Eskom said an approval would be required by the end of February at the latest.