CHROMESA said it welcomed the introduction of a short-term framework for negotiated power pricing agreements by South Africa’s Department of Energy, saying a mechanism to cut electricity costs was crucial for the survival of the country’s ferrochrome sector.
The framework would allow companies negatively affected by the high costs of power to negotiate lower electricity tariffs with entities that provide power, such as Eskom, South Africa’s state-owned power utility.
The mining sector has argued that a 523% increase in the power tariff in the last decade has resulted in Eskom’s electricity price to large industrial customers becoming globally uncompetitive.
As a result, a large portion of the country’s ferromanganese and ferrochrome sectors are loss-making. Merafe Resources, which is in joint venture with Glencore, South32 as well as African Rainbow Minerals have shut capacity.
“We reiterate our central point that any other possible solution to these challenges – for instance the proposed chrome ore export tax – would at best be an exceptionally short-term one,” said ChromeSA.
It was referring to a Cabinet proposal in November that South Africa impose an export levy on chrome ore in an effort to protect the industry. Chrome ore exporters such as Sibanye-Stillwater, Anglo American Platinum and Impala Platinum have opposed the move, saying it would only have short-term benefits, at best.
“In addition, the unforeseen consequences of the imposition of such a tax would do significant damage to the chrome ore export sector, without any long-lasting benefits for the ferrochrome sector,” said ChromeSA.
“We welcome this move by the Department of Mineral Resources and Energy and urge government to focus on relieving the pressures placed on the ferrochrome industry by electricity prices,” it said.