Glencore will restart ferro-chrome production at its shuttered South African operations after energy provider Eskom guaranteed it energy tariff relief, Glencore Ferroalloys chief executive Japie Fullard told Argus on the sidelines of the International Chromium Development Conference.
Eskom announced on 10 April that it had submitted an energy tariff of 0.62 South African cents/kWh (4¢/kWh) for the Glencore Merafe Chrome Venture and Samancor Chrome to energy regulator Nersa. The tariff of 62 cents/kWh follows a decrease to 87.44 cents/kWh effective from 1 January 2026 for the two South African ferro-chrome producers.
Glencore-Merafe said on 10 April that it had "provisionally accepted" the proposed tariff, subject to certain clarifications and conditions.
The announcement came as South African ferro-chrome smelting looked to be on the brink of total collapse because of high energy costs that account for 30-40pc of the cost of production for South African producers.
Samancor and [Glencore-Merafe)[https://metals.argusmedia.com/newsandanalysis/article/2810909] signalled moves towards major retrenchments as high energy prices made competition with Chinese ferro-chrome producers challenging. Production at both companies plunged last year.
In the 10 April statement, Glencore confirmed that it had delayed its retrenchment process to 11 May 2026, to give time for Nersa to approve the new tariff.
New tariff necessary for FeCr survival
Glencore announced that it restarted its Lion Smelter on 18 February after receiving the interim electricity tariff of 87.74 cents/kWh. It was able to restart Lion because it is comparatively technologically advanced and has a lower cost of production than Glencore's other South African smelters, Fullard said. But at the interim electricity tariff rate, the company would not be able to avoid retrenchments at its other operations.
The new lower tariff rate means that the other operations will not produce at a loss.
"The 62 [cents/kWh] will actually give us just a breakeven," Fullard said. "If we put in the 62 power cost and we put in the chrome cost at market, we don't make money out of ferro-chrome but we keep our people in jobs."
Samancor and Glencore together produced about 1mn t of ferro-chrome in 2025. With the new deal, the two could produce as much as 4.5mn t/yr, Fullard said.
Part of the agreement with Eskom includes upside-sharing. Eskom will receive a share of profits if the global market landscape shifts and profitability increases for Glencore. "Even if we make money, and let's say that we do because of market dynamics, we are 100pc willing to share a profit with [Eskom]," Fullard said. "Then they are in a better position than where they are now."
Fullard emphasised Glencore's intention to be a driver of South Africa's beneficiation activities rather than exclusively export mineral resources and become a price taker, even though simply exporting chrome ore is significantly more profitable for the company.
"The only reason why we wanted the 62 cents is to beneficiate in South Africa. I still believe that if we still have ferro-chrome in South Africa, it means we have a competitive advantage," Fullard said.
Fullard pushed back against critics who say that the lower cost for Glencore and Samancor will come at a cost to the ordinary energy consumer. The difference from the previous price to the new tariff price will be picked up by Eskom, rather than the consumer, he said.
Ferro-chrome smelting provides reliable revenues for Eskom. Glencore and Samancor use about 10 terawatt hours of electricity a year. At the 62 cents/kWh electricity tariff, this translates to approximately 6.2bn rand in revenue for Eskom. If smelting operations were to halt, Eskom would receive none of that revenue but would have the same amount of energy in the grid and be forced to load-shed.
"That's why it was important for us, in the terms and conditions, to lock in a certain time period — so that Eskom has surety of supply," Fullard said. Eskom has committed to a five-year tariff.
Investment key for competitiveness
Fullard highlighted what he sees as the need for South Africa to recalibrate its energy system to support long-term industrial growth.
Glencore is pushing for the nation's energy system to move towards an independent power producer concept where a diverse range of suppliers can generate via solar, hydrogen and other sources and bring that electricity to the grid. "We are actually working with Eskom on this because that is the only real solution," Fullard said.
Maintaining South African ferro-chrome production will also require significant private investment in technological development. At the 62 cents/kWh tariff, South Africa becomes competitive with China. But if Chinese energy costs fall further because of investment in the country's domestic energy, Glencore will once again be uncompetitive.
"We need to go aggressively and look at alternative technologies," Fullard said.
