SA’s ferroalloys industry facing destruction owing to unstinting electricity tariff increases
SOUTH Africa’s ferroalloys industry faced “destruction” owing to a sixfold increase in the electricity tariff provided by the country’s power utility, Eskom, said BusinessLive.
“We are a dying industry,” Nellis Bester, chair of South
Africa’s Ferro Alloys Producers Association (Fapa), told the publication.
In the past three years, 40% of South Africa’s ferroalloy
capacity has been idled because it is no longer competitive, primarily due to a
more than sixfold increase in electricity tariffs for heavy users such as
smelters, mines and large industry, said BusinessLive. Electricity accounts for
up to half of the cost of running a furnace.
The sector required affordable power and visibility of the
rate of increase in the tariff.
“Without bridging this gap with support of the government to
pave the way for long-term pricing incentives or framework … there will be no
smelter remaining in South Africa in two to three years,” said Bester.
“Once closed, there’s no possibility of a restart. It will
simply be too expensive,” he said.
In September, ferrochrome producer, Merafe Resources, booked
an impairment of R1.34bn in the first six months of its 2020 financial year
owing to Covid-19 related production stoppages. But production was also lower
as the firm idled facilities amid unstinting increases in electricity.
Commenting in its market review, Merafe said “…
unsustainably high electricity pricing” was a major feature of the six months
ended June 30. Total South African ferrochrome production had halved in the
second quarter.
“Prices in South Africa have escalated 500% over 10 years.
Under these types of increases, we will struggle,” said Japie Fullard, head of
ferrochrome operations for Glencore in South Africa last month. “I can’t see
how we can operate our smelters in that price environment,” said Fullard in a Miningmx
article.
Merafe is in joint venture with Glencore.
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