Eskom has strongly defended a proposed deeply discounted electricity tariff for major ferrochrome smelters, arguing that retaining their massive power demand is critical to shielding the utility from long-term coal supply exposures and substantial revenue losses.
During a hearing before the National Energy Regulator of South Africa (Nersa) on Monday, Eskom executives threw their weight behind a proposed 62 cents per kilowatt-hour (c/kWh) tariff for ferrochrome producers Glencore-Merafe and Samancor Chrome. This represents a steep reduction from standard industrial tariffs, which can exceed 250c/kWh. The utility argued that losing the smelters’ baseload demand would leave Eskom financially exposed to take-or-pay coal contracts tied to generation capacity that would suddenly sit idle.
The hearing laid bare the existential crisis facing South Africa’s ferrochrome industry. Despite possessing the vast majority of the world’s chrome reserves, South Africa’s share of global ferrochrome production has plummeted from 50% in 2001 to approximately 10% today. Over the same period, China, which has virtually no domestic chrome reserves, has grown its market share from 5% to 65%. This shift has been fuelled by South Africa exporting massive volumes of raw, unbeneficiated chrome ore — reaching nearly 24 million tonnes in 2025, primarily destined for Chinese smelters.
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Electricity constitutes roughly 40% of the production costs for local ferrochrome smelters. Industry representatives argued that the discounted tariff is essential to remain competitive against heavily subsidised Chinese producers. Glencore FerroAlloys chief executive Japie Fullard told the regulator that the proposed 62c/kWh rate is not designed to generate significant profits, describing it as a near-breakeven mechanism that gives the industry a fighting chance to invest in efficiency technologies. The proposed framework includes an upside-sharing mechanism, allowing Eskom to recover additional value should global ferrochrome prices recover and the smelters return to profitability.
The urgency of the situation is tied to looming job losses. The sector, which historically supported hundreds of thousands of direct and indirect jobs, is currently navigating severe retrenchment processes. Fullard issued an urgent appeal for a swift regulatory decision, noting that the company has spent R600 million extending a Section 189 labour restructuring process since December 2025. He warned that shareholders will not permit the extension of these consultations beyond the end of May 2026.
While both Glencore-Merafe and Samancor were offered the same pricing framework, they accepted different contract durations based on their respective risk appetites. Samancor opted for a five-year term with a minimum three-year take-or-pay commitment, while Glencore-Merafe selected a three-year term with a minimum two-year take-or-pay obligation. Samancor chief technology officer Steph van Sittert noted that Nersa’s decision will serve as a precedent for the government’s long-stated, but poorly executed, policy of domestic mineral beneficiation.
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Eskom assured the regulator that the discounted tariff would be ringfenced to ensure it does not cross-subsidise or negatively impact other electricity consumers. However, energy research group Meridian Economics raised concerns regarding transparency. Senior analyst Adam Roff argued that the public documentation lacks crucial details, including the methodology used to determine the price, the actual cost of supply to Eskom, and the potential indirect impact on taxpayers.
South Africa vs China: Shifting Ferrochrome Market Dynamics
| Metric | South Africa | China |
| Global Market Share (2001) | ~50% | ~5% |
| Global Market Share (Current) | ~10% | ~65% |
| Domestic Chrome Ore Reserves | Majority of global supply | Negligible |
| Primary Strategy | Exporting raw ore (~24m tonnes in 2025) | Importing ore to feed domestic smelters |