News
16/04/26
Energy relief to support S African FeCr in short term
London, 16 April (Argus) — South African energy tariff relief may not save South
Africa's ferro-chrome sector in the long-term but will support production in the
short term and put pressure on Chinese competitors, market participants at the
International Chromium Development Conference in Zimbabwe said over 15-16 April.
South African state-owned energy provider Eskom announced on 10 April that it
had submitted an energy tariff relief structure of 62 South African cents/kWh
($0.04/kWh) to South African energy regulation Nersa after extensive talks with
the government and South African ferro-chrome producers Samancor and the
Glencore-Merafe Chrome joint venture (JV). This tariff is more than half the
135.82 cents/kWh ferro-chrome producers were paying at the end of 2025. The
tariff relief came after Samancor and Glencore-Merafe sharply cut production in
2025 because of low profitability. The Glencore-Merafe JV's ferro-chrome
production fell 63pc on the year in 2025 after Glencore-Merafe suspended
operations at the Wonderkop and Boshoek ferro-chrome smelters in May. South
Africa is a major global charge chrome producer, although it has struggled in
recent years to compete with lower-cost ferro-chrome produced in China's Inner
Mongolia region. Chinese ferro-chrome producers benefit from lower energy prices
than their South African counterparts. The rise in Chinese ferro-chrome
production pressured global ferro-chrome prices too low to support profitability
for South African ferro-chrome producers at their old energy costs. Argus
assessed high-carbon ferro-chrome 50pc cr at $1.00-1.01/lb ex-works China on 14
April, up 31pc from the start of 2025 but well below prices in 2021-22. For
South African ferro-chrome producers, selling chrome ore has been more
profitable than producing ferro-chrome in South Africa in recent years. South
African UG2 concentrate 40-42pc cr203 prices rose 56pc from the start of 2025 to
$310-320/t cif China main ports on 14 April. Energy relief may be unaffordable
In conversations on the sidelines of the conference, market participants
expressed doubts about the long-term prospects of South Africa's ferro-chrome
production. Multiple senior-level figures said they did not view the new tariff
agreement as financially feasible on the part of the government, and that even
if it led to short-term increases in production, the government will not be able
to meet its commitments over the full five years. The cost of production for
electricity from coal is around 80 South African cents/hr, well above the new
energy tariff at 62 cents/kWh. Bongani Motsa, senior economist at the Minerals
Council of South Africa, agreed that the government cannot afford the deal, but
argued that at the same time, the government cannot afford not to act. If the
smelters close, Eskom will have too much excess capacity and insufficient
revenue. "It is true the government doesn't have that money, but if you look at
the counterfactual, the other option is worse," Motsa said. "The 62 [cents/kwh]
is not a magic bullet, but I think it's a step in the right direction." But for
some of South Africa's competitors, the new tariff is a major concern. An
executive at a Chinese ferro-chrome producer told Argus that Glencore-Merafe and
Samancor's new energy price will bring the producers' cost of production below
their own. The Chinese market is fragmented compared with South Africa, with
over 20 different companies producing ferro-chrome. There is a wide spread
between them in terms of technology and manufacturing processes, and the older
and less-efficient producers are vulnerable to competition. The South African
ferro-chrome industry, in contrast, consists of two major companies that can
produce at an economy of scale. Some of the Chinese ferro-chrome producers
cannot compete with that efficiency if their energy costs no longer put them at
a significant advantage. If South Africa returns to the market at full or close
to full capacity, some of China's ferro-chrome producers will be forced to shut.
"We will feel significant pressure from South Africa if lots of South African
production comes back on line," the producer said. By Maeve Flaherty Send
comments and request more information at feedback@argusmedia.com Copyright ©
2026. Argus Media group . All rights reserved.
