Glencore has indicated that its South African ferrochrome unit could withdraw from ongoing negotiations with the South Africa government over a proposed discounted electricity deal, citing concerns about unfavourable conditions, a company executive said on Thursday, according to Reuters.
The company has maintained that lower electricity tariffs are essential to keep its loss-making smelters operational and prevent job losses.
The government, meanwhile, is seeking to preserve the smelters, which employ thousands of workers and are significant customers of the state-owned power utility Eskom.
On February 27, Eskom offered the country’s two largest ferrochrome producers, including Glencore’s unit, a heavily discounted electricity tariff in an effort to support their struggling operations.
The proposal would reduce electricity costs from 1.36 rand ($0.0808) to 0.62 rand per kilowatt hour, but it remains subject to approval by National Energy Regulator of South Africa under conditions that have not yet been disclosed publicly.
However, Glencore Ferroalloys CEO Japie Fullard warned that the company may abandon the discussions if the terms are not revised.
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“The terms and conditions, the way that it is now, I unfortunately will not be in a position to sign,” Fullard said at a mining conference in Johannesburg.
“So that means, if they do not come to the party, we are going to walk away from the 62 cents (deal),” he added.
Fullard also noted that representatives of ferrochrome producers were scheduled to meet with government officials later on Thursday to continue discussions.
Earlier, on March 2, Glencore postponed planned lay-offs at its ferrochrome operations until March 31 to allow time for negotiations to continue. Fullard said that up to 1,500 jobs could be cut if no agreement is reached on the electricity pricing package.
Samancor Chrome, the other major producer offered discounted electricity, has stated it will proceed with plans to lay off workers.
The company said that while the reduced tariff could help ease electricity cost pressures, the conditions attached to the offer pose “a threat to the long-term viability of the ferrochrome industry”.
Neither Glencore nor Samancor has disclosed the specific conditions, as negotiations remain ongoing. South Africa’s smelting industry continues to struggle with sharply rising electricity costs, which have increased tenfold since 2008, alongside intensifying competition from Chinese producers.
Currently, only 11 out of a possible 66 smelters in the country remain operational.
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Image Credit: Central News
