[miningmx.com] – ESKOM has reprised its power buy-back programme with the Xstrata-Merafe Chrome Venture which agreed to temporarily shut five of its twenty furnaces from January 1 to end-March.
“In return, Eskom will buy-back the energy not consumed by these furnaces,” said Xstrata-Merafe Chrome in an announcement. “The ferrochrome production loss to the Venture is estimated to be 100,000 tonnes,” it added.
“This arrangement will be mutually beneficial to Eskom and the Venture and will not result in job losses at these furnaces,” it said. Eskom agrees to buy-back power from high intensity users provided no retrenchments take place.
Xstrata-Merafe Chrome joins another producer, Hernic Ferrochrome, which has agreed to bring the shutters down on its De Kroon operation between December and March reducing production to 40% of total.
Eskom is seeking an additional 600MW to 1,000MW in supply and demand-side options over the coming six months notwithstanding a near 3% decline in demand during the first half of Eskom’s financial year.
Paul O’Flaherty, Eskom CFO, said electricity sales fell to 110,766 gigawatt hours in the first half of the power utility’s financial year.
The extra capacity is required to accelerate Eskom’s maintenance plans which are currently in backlog and which is estimated to cost R35bn.
There have been improvements in the backlog, reducing the number of units requiring attention to 20 from 26, but some of Eskom’s power stations are more than 30 years old.
Ironically, power buy-backs are more profitable for ferrochrome producers than smelting the metal owing to the decline in prices. Ferrochrome prices for the fourth quarter had dropped 12% to $1.10/lb from $1.25/lb in the third quarter, said Merafe Resources in October.
This was the second successive fall for ferrochrome after prices fell 7% in the third quarter of the year. Price weakness is due to poor steel-maker demand in Europe as well as excess supply in China.
