Deal now in the hands of regulator Nersa.
South Africa’s largest smelter operators have one final hurdle to clear before locking in a new 62 cents per kilowatt hour (kWh) tariff from Eskom – sign-off from the National Energy Regulator of SA (Nersa) within the next 30 days.
This new tariff is subject to clarification on certain points but paves the way for the reopening of several large ferrochrome smelters that are currently idle due to crippling electricity costs, which have escalated 900% since 2008.
Industry bodies and trade unions have warned that closure of SA’s ferrochrome smelting capacity would further the deindustrialisation of the country, following ArcelorMittal SA’s wind-down of its long steel business in 2025 – also because of unsustainable electricity costs.
New tariff deal
The new tariff deal applies to the two largest smelter operators, Glencore-Merafe Chrome Venture (which operates five smelters in Mpumalanga, Limpopo and North West province) and Samancor Chrome (which operates six smelters across the country).
Both companies initiated retrenchment steps which have been delayed pending urgent agreement on the new tariff.
Glencore-Merafe curtailed operations by 63% in 2025, with just one out of five smelters operational in February 2026. Samancor is likewise operating a limited number of its furnaces.
Eskom tariff agreement lower
The new 62c tariff agreement with Eskom is considerably lower than the temporary special tariff of 87c/kWh currently in place and the standard industrial rate of R1.36/kWh.
Electricity accounts for 40% to 60% of the ferroalloy industry’s costs.
Just 11 of the country’s 66 ferrochrome smelters are currently operational due to unsustainable increases in electricity costs.
Eskom happy
In a statement on Friday, Eskom said the lower tariff improves the utility’s liquidity without requiring higher tariffs, additional Eskom borrowing, or further government support.
“It also provides Eskom with predictable sales volumes for up to the next five years and protects public investments made in the utility, as well as its ability to support reindustrialization and economic growth.”
Eskom submitted an application to Nersa for approval of the tariff on Friday.
“Without the success of Eskom’s turnaround over the past three years, delivered by our 40 000 employees, which restored consistent baseload electricity supply, for which there is currently no alternative source available to energy-intensive users, we would not have been in a position to support the ferrochrome industry or play a meaningful role in preventing job losses,” says Dan Marokane, Eskom CEO.
The ferroalloy and iron and steel industries are under strain from global commodity markets, rising input costs and structural competitive challenges.
Eskom says these will be prioritised ahead of other smelter industry sectors.
Clarity
Some of the sticking points believed to have delayed agreement on the new tariff include its duration and whether it would apply across the smelting sector.
The Eskom announcement makes it clear that the agreement applies to just Samancor Chrome and Glencore-Merafe Chrome, and that it is medium term in nature, meaning it will last for up to five years.
It involves an amendment of the current negotiated pricing agreements (NPAs), which are customised pricing agreements between Eskom and its large industrial customers. They allow for variations from approved standard tariffs under certain conditions.
The precise terms and conditions around the tariff will be made public once Nersa approves the deal.
The amended NPA between Eskom and the two smelter operators is medium-term in nature and allows for “a proactive, time-bound, case-by-case approach, allowing Eskom to tailor pricing and contractual structures to the specific commercial circumstances of each smelter, while ensuring transparency, fairness and regulatory alignment for all customers,” says Eskom in a statement.
The new tariff allows for tailored pricing for each smelter, rather than applying it across the board.
Glencore-Merafe says the new tariff “represents a significant and positive step forward in ongoing efforts to support ferrochrome beneficiation in South Africa”.
To align with the regulatory timeline, the termination date of its Section 189 retrenchment process has been extended to 11 May 2026.
Lifeline for the country
The new tariff deal was heavily promoted by Minister of Electricity and Energy Kgosientsho Ramokgopa, who says it will allow for idle smelters to reopen.
He says it will protect jobs, boost exports by R76 billion, add nearly R18 billion in revenue to Eskom, and bring in a further R5.5 billion in tax.
Other smelter operators not included in this agreement will have to negotiate separate NPAs with Eskom.
“The [Glencore-Merafe Chrome] Venture acknowledges and appreciates the constructive engagement and support of Eskom, government, and the relevant unions throughout this process,” says Glencore-Merafe in a statement.
“From the outset, the Venture has remained committed to sustaining local beneficiation, protecting jobs, and supporting the long-term viability of its operations and the communities in which it operates.”
This article was republished from Moneyweb. Read the original here.