South African manganese alloy producer Transalloys has ceased all production at its last remaining smelter in the country because of an inability to compete caused by high-rate electricity tariffs, the company said on Thursday.
The silico-manganese and ferro-manganese producer shut down all furnaces on 1 July, as negotiations over electricity tariffs with energy utility Eskom and the South African government's Department of Energy and Electricity (DEE) continued.
Transalloys is a major producer of manganese ferro-alloys across Africa, accounting for about 80pc of the world's high-grade manganese ore reserves and 155,000 t/yr of alloy output. Halted production and the potential permanent closure of the smelter would significantly hit customers who rely on South African alloy supply.
The suspension of the smelter places about 600 permanent jobs and an estimated 7,000 downstream livelihoods at risk.
Transalloys officially concluded Section 189 consultations and a collective retrenchment agreement, based on the plant's financial distress since the end of 2022. Transalloys will continue negotiations with Eskom to achieve a sustainable solution until 31 July, when the retrenchment notice will be issued.
Rising energy tariffs in South Africa over the past three years have weighed on ferro-alloy producers and driven persistent financial losses at smelters that have been unable to offset higher rates through significant price increases to customers.
"In the past 3½ years, Transalloys' production was curtailed due to sluggish demand globally," chief executive Konstantin Sadovnik told Argus.
The shutdown follows Transalloys' hardship notice to Eskom and Nersa, South Africa's national energy regulator, in December, through which it sought short-term relief from the electricity tariffs. Since then, the ferro-chrome industry has secured reduced tariff rates after ongoing discussions with Eskom and has been granted intermediary reduced tariff solutions.
"What we do not understand is why that same blueprint cannot now be extended to the remaining non-ferro-chrome smelters, namely manganese and ferro-silicon, representing only 11pc of the ferro-alloys sector in terms of power consumption," Sadovnik said.
Glencore Merafe Chrome Venture, one of South Africa's two main ferro-chrome producers, secured a new pricing framework set for three years.
"Now that the framework exists, it is difficult to understand why the rest of the sector continues to face lengthy negotiations with no certainty or timeline," Sadovnik said.
"It has been a tough uphill battle," Sadovnik added. "Our business has been losing substantial amounts of money for the past 3½ years. We have done everything possible to reduce costs, conserve cash, raise awareness and engage government, Eskom and the regulators to find and implement a sustainable electricity tariff solution. Now, effectively, our destiny is in the hands of Eskom, Nersa and DEE — they are to determine whether Transalloys lives or dies. Further procrastination will amount to a death sentence."
