HIGH electricity tariffs, interruptions, and deteriorating conditions in the ferrochrome market have forced Glencore and its joint venture partner, Merafe Resources, to consider restructuring its Rustenburg smelter.
As a result, the partners have commenced a Section 189 process in terms of the Labour Relations Act that may result in job losses. Glencore did not specify the extent of its planned restructuring, but it said Rustenburg smelter was suffering financial losses and would continue to do so “for the foreseeable future”. The Rustenburg smelter produces about 430,000 tons of ferrochrome annually. Glencore’s total smelting capacity from South Africa is 2.3 million tons (Mt).
This decision is the result of deteriorating operating and market conditions across the South African ferrochrome industry including unsustainable electricity tariffs and interruptions, cross subsidies and real cost inflation,” Glencore said. Significant ferrochrome output had also been displaced to international producers whose costs are lower.
The National Energy Regulator of South Africa (Nersa) last year granted Eskom, the state-owned power utility, annual electricity tariff increases of 9.4% in 2019/2020, increasing 8.1% and 5.2% in subsequent years.
Nersa also approved an additional 4.4% tariff increase to allow Eskom to recoup costs which amounted to an increase in the annual electricity tariff for 2019/2020 to 13.9%, and a compounded increase of 9% over three years. This is some 29.5% higher than the current electricity tariff.