Merafe Resources extends consultation on ferrochrome smelter crisis until 2026

Merafe Resources said Tuesday the consultation period for a government-aided intervention to prevent its joint venture ferrochrome smelters from closing will be extended to February 28, 2026.

Last week, Merafe Resources said retrenchment notices would be issued for more than 2 000 workers at the Boshoek and Wonderkop smelters after an earlier government proposal on electricity tariffs to save the Glencore Merafe Chrome Venture's (JV) ferrochrome smelters from closing, would only benefit one of its three smelters.

The JV has been negotiating for years for lower electricity tariffs. Merafe's smelters account for about a third of South Africa's ferrochrome exports.

Merafe said a new Memorandum of Understanding (MOU) has been signed with Eskom following recent engagements. Estimates are that some 300 000 to 350 000 jobs have been lost due to the closure of 14 smelters across the country.

Eskom said Monday in a statement that the MoU establishes a joint multi-stakeholder task team comprising Eskom, Samancor Chrome and the JV, and government representatives. The team aims to develop an intervention "that ensures that electricity pricing solutions do not impose additional burdens on other customers."

Samancor Chrome and Glencore-Merafe currently operate under six-year Negotiated Pricing Agreements (NPAs) that were approved by the National Energy Regulator of SA (NERSA) in October 2023.

These NPAs had given energy-intensive industries more globally competitive electricity tariff structures with the aim of supporting production, jobs and maintaining South Africa's industrial capacity.However, both companies activated the hardship provisions in these agreements, as market conditions worsened and electricity costs became increasingly difficult to absorb.

NERSA is currently processing an application for an interim tariff adjustment, while the government is working on another mechanism to support more competitive pricing for the sector.

"Once the interim tariff is approved, the two companies have committed to suspend the retrenchment processes and bring about 40% of their furnace capacity back online, while a long term solution is worked out in the MoU," Eskom said in a statement.

Merafe's directors said the MoU signed with Eskom was to extend engagement aimed at finding a workable energy solution for the ferrochrome industry, by no later than February 28, 2026."The MOU formalises a joint commitment to develop a sustainable, long term intervention for the ferrochrome sector, which has been severely affected by global market pressures and rising production costs," Eskom said.

"The MoU reflects a shared commitment to ensuring the long-term viability of the ferrochrome industry and its operations, This extension period demonstrates the venture's commitment to engaging constructively with the South African government and other stakeholders to find a viable solution that can save and support competitive beneficiation in South Africa," they said.

Merafe clarified that despite the new agreement, some operational changes would still move forward: "For the avoidance of doubt, the consultation process relating to the rationalisation initiative aimed at enhancing operational efficiencies through the streamlining and right-sizing of operations (Project Phoenix) will continue as planned and will not be impacted by the MoU.

"Earlier this year, both smelters activated the hardship provisions of their NPAs as market conditions deteriorated and electricity costs became increasingly difficult to absorb. In response, Eskom applied for a temporary waiver of take-or-pay obligations, which NERSA approved for a limited period. While this helped stabilise operations temporarily, it highlighted the urgency of establishing a more sustainable, long-term solution.

"Eskom welcomes the collaborative efforts of government, labour, and industry. The MoU creates a structured process to find a sustainable and responsible solution that maintains industrial capacity while protecting broader electricity consumers," said Eskom Group CE, Dan Marokane.

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