• NERSA cuts power tariffs 35.6% for two South African ferrochrome producers
• Temporary 12-month relief aims to prevent closures and job losses
• Measure conditional on funding, shielding households from higher costs

South Africa’s energy regulator NERSA on Jan. 29 approved a 35.6% cut in electricity tariffs for two major ferrochrome producers, Samancor Chrome and the Glencore-Merafe joint venture. The move is intended to stabilise operations at risk of closure and protect key industrial jobs.

The decision reduces the industrial tariff to 87 cents per kilowatt-hour from 135 cents for a temporary 12-month period. It also includes an exemption from take-or-pay obligations, clauses that normally require companies to pay for electricity they committed to purchase even if they do not consume the full amount. In this context, suspending take-or-pay allows smelters to avoid fixed costs that cannot be covered during a period of economic strain and sharp increases in electricity tariffs.

An industry weakened by surging energy costs and job losses

The measure follows Samancor Chrome and the Glencore-Merafe joint venture launching closure and redundancy procedures. The companies cited the lack of financial viability of their operations under existing tariffs. More broadly, more than a dozen smelters have shut down in South Africa in recent years, leading to the loss of thousands of direct and indirect jobs across the sector.

Energy costs are the largest operating expense for smelters. Electricity tariffs have risen by more than 900% since 2008, undermining the viability of the industry.

The intervention is conditional on a government funding arrangement to ensure that the gap between the standard tariff and the reduced tariff is not passed on to residential and commercial consumers. Quarterly reports must be submitted to NERSA to monitor the effectiveness of the measure and adjust the policy if necessary.

Ferrochrome production combines chrome and iron to produce an alloy essential to the global stainless steel industry. It is a high value-added sector that transforms chromite ore into exportable intermediate products. Maintaining operations helps preserve specialised expertise in high-temperature metallurgical processes, the management of complex electrical systems, and quality control. These skills would be difficult to rebuild in the event of closure.

The temporary tariff cut reflects the need to support a strategic industry while avoiding additional costs for other consumers. It also highlights the urgency of developing a sustainable tariff framework for energy-intensive industrial users.

In 2024, South Africa was the world’s second-largest producer of ferrochrome, behind China and ahead of Kazakhstan.

Olivier de Souza