The National Energy Regulator of South Africa (Nersa) has approved an electricity tariff agreement between energy utility Eskom and ferro-chrome smelters that will prevent the shutdown of the country's ferro-chrome industry in the near term.
Eskom's new tariff for ferro-chrome producers Samancor and Glencore-Merafe is set at 62 South African cents/kWh (4¢/kWh), down from 87.44¢/kWh at the start of 2026 and less than half the 135¢/kWh these producers were paying at the end of 2025. The tariff for Samancor is set for five years and the tariff for Glencore-Merafe is for three years, both effective from 1 June.
Nersa also confirmed that any revenue shortfall from the lower tariff price will be borne by Eskom directly and cannot be recovered through increased levies on standard tariff customers.
Merafe Resources said today that it has called off its Section 189 retrenchment process at the Glencore-Merafe joint venture in response to the approval of the new tariff, which will prevent the potential loss of thousands of jobs. The company is still in talks with Eskom to finalise the details of the power purchase agreement that will use the tariff.
Samancor's position is still not clear. The company moved forward with a retrenchment notice in March, at which time it planned to cut 2,400 jobs across its smelting operations and corporate offices, according to South Africa's National Union of Mineworkers. That notice came despite Eskom's initial announcement in February of its intent to offer the lower 62¢/kWh tariff.
It is possible that Nersa's approval of a longer tariff period for Samancor may be an incentive to halt the retrenchment process, but Samancor has not yet issued any public statement to that effect.
Production costs for South African ferro-chrome remain extremely challenging, even under the new tariff, but general consensus across the market is that the agreement will avert the almost total collapse of production that threatened to occur without electricity price relief.
Production at Glencore-Merafe and Samancor dropped sharply last year as they struyggled in the face of lower-cost competition from Chinese ferro-chrome producers that benefited from lower energy prices. This dynamic has pushed South Africa towards sales of chrome ore overseas to China in recent years, rather than utilisation of ore reserves to produce higher-value ferro-chrome.
Glencore Ferroalloys chief executive Japie Fullard [told Argus in April](https://direct.argusmedia.com/newsandanalysis/article/2816436) that the 62¢/kWh tariff only represents a breakeven margin at Glencore-Merafe's smelters, other than the more technologically advanced Lion operation, which has a lower production costs. But he emphasised that the group wants to continue to beneficiate ore in South Africa, despite the lack of strong margins.
