South Africa’s Coal Plants Urgently Need Refurbishment to Avoid Ferrochrome Crisis

Earlier this week The Common Sense reported that Samancor Chrome, one of South Africa's largest ferrochrome producers, has warned that it may be forced to cut as many as 2 500 jobs next year, primarily due to soaring electricity costs, which account for up to 60% of its production expenses.

Ferrochrome, a key ingredient in the production of stainless steel, is a vital part of South Africa's global manufacturing output, yet rising power prices are crippling the sector’s competitiveness.

Glencore has now also announced that it will shut down smelters in South Africa and retrench more than 2 000 workers, citing similar reasons to Samancor: escalating electricity costs and an unsustainable business environment. Glencore has already closed ten of its twenty-two furnaces and retrenched roughly 1 500 workers at its Rustenburg and Lydenburg smelters.

South Africa, once the dominant global producer of ferrochrome, has seen its position eroded. China overtook South Africa in 2012 in refining and smelting output, and now other countries in the region, including Zimbabwe, Angola, and Zambia, are expanding their own ferrochrome production. This makes South Africa’s ongoing struggles all the more concerning, with the country risking both its jobs and its place in the global market.

Samancor has already attempted cost-cutting measures to keep operations afloat, but these have not yielded enough to stem losses. The company is now contemplating shutting down or downsizing several of its facilities. This bleak reality is not unique to Samancor.

The crisis is rooted in broader structural failures, particularly within South Africa’s electricity system. Dirk Hermann, the CEO of trade union Solidarity, has pointed to government inaction, blaming Eskom’s unaffordable tariffs and the collapse of Transnet’s logistical capacity for creating an environment in which heavy industries such as ferrochrome production cannot thrive.

Hermann argues that the government’s failure to act on critical infrastructure issues, particularly the refurbishment of South Africa’s ageing coal-fired power plants, is pushing the industry to the brink of collapse.

Eskom’s underperforming plants, which are responsible for a large chunk of South Africa’s power supply, urgently need upgrading. Without this, energy costs will continue to soar, driving up production costs and forcing more industries to scale back operations or shut down entirely.

The consequences of this crisis extend far beyond company balance sheets. Entire communities that rely on these industries for jobs, income, and stability are at risk. South Africa’s inability to ensure affordable and reliable electricity is jeopardising its industrial base, with millions of livelihoods hanging in the balance.

Hermann warns that the situation is likely to escalate into a full-blown social crisis, one that will be exacerbated by the government’s continued failure to take responsibility for the energy and infrastructure crisis. The damage done by inaction is already evident, and if the government continues to delay necessary reforms and investments in power generation, the country will face even steeper economic and social costs in the years ahead.

Frans Cronje told The Common Sense that the ferrochrome crisis might easily have been avoided had the South African government acted with greater urgency to refit the country’s defunct coal fleet. According to Cronje, “A refitment will be quick, cheap, and could add up to 10GW in production to the country’s grid. It’s about demand and supply … as South Africa’s economy tries to grow on government reforms, electricity supply constraints are so tight that prices climb very quicky. If you want to manage the price issue you can reduce demand or increase supply. South Africa has an easy option to do the latter.”