South Africa’s energy regulator, the National Energy Regulator of South Africa (Nersa), has granted approval to the state electricity utility Eskom for a pivotal six-year negotiated pricing agreement. This agreement is set for the Glencore-Merafe ferrochrome smelter operation in Rustenburg, North West Province, marking a significant decision in the nation’s energy and industrial sectors.
This development follows a decision by the North Gauteng High Court on November 10, which established Eskom as the direct supplier for the Rustenburg smelter rather than the Rustenburg municipality. The court’s ruling also directed Nersa to assess Glencore-Merafe’s application based on the interim framework designated for long-term negotiated pricing agreements.
The approved framework aims to support South Africa’s critical and strategic sectors, with a focus on industries like ferrochrome production, which play a vital role in the nation’s economy. The framework targets large power users that have minimum consumption thresholds of 80 GWh or load factors exceeding 70% and where electricity costs are a significant component of operations.
According to a report by Mining Weekly, ferrochrome, a crucial component in the production of stainless steel, sees 90% of its output utilized in stainless steel and speciality steel products. This agreement between Eskom and the Glencore-Merafe ferrochrome smelter is expected to bolster this key industry. Eskom’s application for the pricing agreement, submitted in May, aligns with the interim framework for long-term negotiated pricing and covers each of the five Glencore-Merafe ferrochrome smelter operations spread across Mpumalanga, Limpopo, and North West.
While Nersa had approved four out of the five applications on October 26, Rustenburg Glencore Operations was initially left out, pending a separate application by the Rustenburg municipality. However, the recent High Court ruling led to Nersa processing the application for the Rustenburg smelter directly.
The negotiated pricing agreement under the interim framework provides incentive pricing to enable industries like Glencore-Merafe to remain competitive. Despite efficiency improvements by Glencore-Merafe over the years, further advancements have been hindered due to the uncertainty caused by rising electricity tariffs. This agreement sets a pricing level that ensures Glencore-Merafe’s sustainability while covering Eskom’s service costs.
Glencore Operations in South Africa’s North West region demands a consistent power supply of 225 MVA, operating continuously throughout the year. This arrangement eliminates the fluctuations in pricing due to time of use and seasonality, providing more predictable pricing for the smelter and assured demand for Eskom. The move is expected to enhance planning predictability for the smelter and provide Eskom with certainty regarding the smelter’s power demands, as per Nersa’s media release to Mining Weekly.
