Nersa Confirms Tariff Cut
On January 29, 2026, the National Energy Regulator of South Africa (NERSA) approved Eskom’s application to reduce electricity tariffs by approximately 35% (from R1.36 per kilowatt-hour to 87.74 cents per kWh) for two ferrochrome smelters – the Glencore-Merafe and Samancor smelters.. This relief is temporary, and will last for a 12 month period starting from January 2026, and is intended to prevent further closures and job losses in the sector.
The approval is conditional on the South African government funding the revenue shortfall to Eskom, ensuring that standard tariff customers (like households and other businesses) do not bear the cost. This move follows Eskom’s December 2025 request and public hearings where industry stakeholders highlighted the risk of widespread shutdowns without intervention. It’s described as buying “a little bit of time” for the embattled industry, which has been hammered by high power costs representing 35-60% of production expenses.
Background on South Africa’s Ferrochrome Industry
Ferrochrome (FeCr) is an alloy of chromium and iron, primarily used in the production of stainless steel, where it enhances corrosion resistance and durability. South Africa has been a global powerhouse in this sector due to its vast reserves of chromite ore—the primary raw material for ferrochrome—located in the Bushveld Igneous Complex, which holds about 80% of the world’s known chromite resources. The country remains the world’s largest producer of chrome ore, exporting raw material to processors abroad, but it has historically dominated ferrochrome production as well, accounting for up to 40-50% of global output in peak years.
The industry took root in the mid-20th century, with early smelters established in the 1970s. Companies like Samancor and Glencore (through predecessors) expanded operations, leveraging cheap electricity from Eskom’s coal-fired power plants to beneficiate ore locally.
At its height in the early 2000s, South Africa produced over 4 million tons of ferrochrome annually, supporting tens of thousands of jobs in mining, smelting, and related sectors. However, the sector’s fortunes shifted post-2008 global financial crisis, exacerbated by rising electricity tariffs that are up over 900% since then, unreliable power supply (load shedding), and increasing competition from low-cost producers like China, which now dominates global ferrochrome output by importing cheap South African ore and using state subsidised energy. This has led to a decline in local beneficiation, with more ore exported raw rather than processed into higher-value ferrochrome.
Current Situation in the Industry
South Africa’s ferrochrome industry is in severe distress, often described as on the brink of collapse. Production has plummeted: from around 3.3 million tons in 2024 to an estimated 2 million tons in 2025, with projections as low as 1-1.5 million tons for 2026 if trends continue. Exports collapsed by 70% in 2025, dropping from a quarterly average of R20 billion in 2023 to R5 billion in Q3 2025, driven by falling global prices, high input costs, and operational shutdowns.
Key challenges include:
- Electricity Costs and Reliability: Power now accounts for 40-60% of production costs, rendering South African smelters uncompetitive against Chinese rivals. Over a dozen smelters have closed in recent years, with only 4 out of 48 ferrochrome furnaces operational as of early 2026.
- Job Losses and Economic Impact: Thousands of jobs have been lost, with estimates of 24,000 direct positions at risk in the ferrochrome sector alone, plus ripple effects on upstream mining and downstream stainless steel industries. Unemployment in related communities, particularly in Mpumalanga and Limpopo provinces, has worsened.
- Global Market Pressures: Low ferrochrome prices (at pandemic-era lows) and competition from China, which processes imported South African ore cheaply, have squeezed margins. South Africa has ceded its top spot as the world’s leading ferrochrome producer to China.
- Other Factors: Poor rail and port infrastructure hampers exports, while environmental regulations and the push for greener energy add costs. Glencore-Merafe, for instance, reported a 25% production drop from 2024 to 2025.
Despite these woes, the industry still contributes significantly: South Africa produces about 30-40% of global ferrochrome, supporting foreign exchange earnings and the stainless steel value chain.
The Two Major Players
The two ferrochrome smelters benefiting from the tariff relief belong to the sector’s largest operators:
- Samancor Chrome: A vertically integrated giant, Samancor is one of the world’s top ferrochrome producers, with operations spanning chrome ore mining and smelting. Founded in the 1970s, it operates multiple facilities, including Ferrometals (FMT) in Emalahleni (Mpumalanga), Middelburg Ferrochrome (MFC), and Tubatse Ferrochrome (TFC) in Limpopo. It has a capacity of around 1-1.5 million tons annually but has idled most furnaces due to costs. In late 2025, it initiated retrenchment processes affecting up to 2,500 jobs. Samancor is jointly owned by a consortium including South African and international investors.
- Glencore-Merafe Chrome Venture: This joint venture between Swiss mining multinational Glencore (79.5% stake) and South African-listed Merafe Resources (20.5%) is the world’s largest ferrochrome producer by capacity. It operates smelters like Boshoek, Wonderkop, and Lion in North West and Limpopo provinces, with a combined capacity of over 2.3 million tons—about a third of South Africa’s total. In 2025, it suspended operations at several sites and began layoffs for nearly 2,500 workers, citing unsustainable power costs. Glencore brings global expertise, while Merafe provides local empowerment credentials.
These two dominate South Africa’s ferrochrome landscape, controlling most production and employing thousands directly.
Future Moves and Outlook
The 12-month tariff relief is a stopgap, essentially buying time for broader reforms that are required for the industry to survive longer term. In December 2025, Eskom signed Memorandums of Understanding (MoUs) with both Samancor and Glencore-Merafe, committing to develop long-term solutions within three months, potentially including even lower tariffs (targeting 62c/kWh) to restart shuttered electricity plants. The South African Ferroalloy Producers Association has also called to have relief measures extended to related sectors like manganese and vanadium smelting.
Potential developments include:
- Government Bailouts and Subsidies: Further state funding or incentives to offset power costs, tied to job preservation and green transitions (e.g., renewable energy integration for smelters).
- Structural Reforms: Improvements in Eskom’s grid reliability, rail logistics (via Transnet), and export infrastructure to boost competitiveness. The government may impose chrome ore export taxes to encourage local beneficiation, though the industry warns this could backfire by reducing mining output.
- Industry Consolidation or Closures: Without viable tariffs, more permanent shutdowns are likely, leading to expertise loss and deindustrialization. Analysts predict South Africa could cease being a major player by 2027 if unaddressed.
- Global Shifts: Producers may pivot to exporting more raw ore or seek international partnerships. Labor unions and the government are pushing for interventions to save 200,000+ jobs across the value chain.
- Raw Ore Export Restrictions: Consideration should be given to restrict raw chromium ore exports to other countries to boost local industry development and dominance should also be considered. Although the South African government’s cosy relationship with Beijing may prevent this from being actioned.
Overall, while the tariff cut offers short-term breathing room, the industry’s survival hinges on achieving internationally competitive energy pricing and addressing systemic issues. If successful, it could stabilise production at 2-3 million tons annually; otherwise, further decline is the likely outcome.
