South Africa Offers Glencore Smelters Cheaper Power to Save Jobs

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(Bloomberg) — South Africa has offered Glencore Plc’s ferrochrome smelting venture and Samancor Chrome Ltd.’s operations cheaper electricity in a bid to save jobs.

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Glencore’s joint business with Merafe Resources Ltd., which processes chrome ore into ferrochrome, has been in talks for months with the government and state power utility Eskom Holdings SOC Ltd. about lowering its energy costs. In December, it extended a consultation process on about 1,500 job cuts to the end of this month.

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Eskom and the government have proposed supplying the smelters with electricity priced at 62 South African cents per kilowatt-hour, a tariff requested earlier by the industry, Electricity and Energy Minister Kgosientsho Ramokgopa told reporters in the capital, Pretoria, on Friday. 

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“We have no intention of socializing these costs” by passing them on to customers, he said. 

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Eskom Chief Executive Officer Dan Marokane said the companies will need to agree to the arrangement, which includes risk-sharing measures and will require regulatory approval.

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“The proposed contract and framework aim to provide stability to the ferrochrome industry by supporting its recovery, while Eskom identifies viable pathways toward a more appropriate price trajectory for industries in distress,” he said at the briefing.

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Only 11 of the South Africa’s 66 smelters remain operational, underscoring how rapidly rising electricity tariffs have impacted metals processing. 

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Stabilized Supply

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While Eskom has stabilized supply, ending years of rolling outages that constrained economic growth, energy-intensive industries have continued to struggle as preferential pricing deals that originally attracted them to South Africa expire.

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The National Energy Regulator of South Africa approved a 35% reduction in prices for smelters for one year following an earlier round of talks.

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That decision allowed the startup of Glencore-Merafe’s Lion smelter in the northern Limpopo province. The plant can roughly break even if it pays 87 South African cents per kilowatt-hour of electricity, Japie Fullard, the CEO of Glencore Alloys, said in an interview this month. 

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The joint venture’s Boshoek and Wonderkop smelters, which were shut in December, need to pay 62 South African cents per kilowatt-hour to break even. 

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Labor union Solidarity said in a statement Thursday that smelter closures may affect thousands of workers at Glencore, Samancor and Columbus Steel.

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—With assistance from Peter Martin.

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