20/04/26
Glencore's S Africa FeCr output to rise on energy deal
London, 20 April (Argus) — 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. By Maeve
Flaherty Send comments and request more information at feedback@argusmedia.com
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