Eskom has finalised a memorandum of understanding (MoU) with Samancor Chrome and the Glencore-Merafe Chrome Venture to jointly develop a sustainable, long-term intervention for South Africa’s ferrochrome sector.
The MoU follows engagements on December 5 with the Minister of Electricity and Energy and organised labour, and formalises a commitment by Eskom, the two producers and government representatives to work collaboratively in addressing challenges facing the sector. A joint multi-stakeholder task team has been established and is expected to present a proposed solution within three months.
According to Eskom, the task team will prioritise developing an intervention that supports industrial competitiveness while ensuring that electricity pricing solutions do not impose additional cost burdens on other electricity customers.
Samancor Chrome and Glencore-Merafe currently operate under six-year negotiated pricing agreements (NPAs) approved by the National Energy Regulator of South Africa (NERSA) in October 2023. The agreements became effective earlier this year under the interim long-term framework issued in 2020 by the then Department of Mineral Resources and Energy. It provides qualifying energy-intensive industries with access to globally competitive electricity tariff structures aimed at supporting production, protecting jobs and maintaining industrial capacity.
Earlier this year, both smelters activated the hardship provisions contained in their NPAs as market conditions deteriorated and electricity costs became increasingly difficult to absorb, Eskom says. Eskom subsequently applied for a temporary waiver of take-or-pay obligations, which NERSA approved for a limited period.
NERSA is currently processing an application for an interim tariff adjustment for the ferrochrome smelters. In parallel, government is working on a complementary mechanism to support a more competitive pricing path for the sector. This mechanism is expected to be finalised within the same three-month period when the MoU task team will develop its proposed solution.
Once the interim tariff adjustment is approved, the smelters have committed to suspend the Section 189 retrenchment process and restore approximately 40% of furnace capacity while the long-term solution is developed under the MoU, Eskom says.
“Eskom welcomes the collaborative efforts of government, labour and industry,” says Eskom’s Group Chief Executive Dan Marokane. “The MoU creates a structured process to find a sustainable and responsible solution that maintains industrial capacity while protecting broader electricity consumers.”
