South Africa’s state-owned power utility, Eskom, has slashed electricity tariffs by 35% for two major ferrochrome producers in a move aimed at preventing operational shutdowns driven by high energy costs.
The National Energy Regulator of South Africa (NERSA), the body responsible for electricity rate, approved Eskom’s application to reduce tariffs for the firms on Thursday.
The reduction applies to Samancor Chrome and the Glencore-Merafe Chrome Venture. Both companies had started cutting back operations and issued retrenchment notices.
They said high electricity costs were putting their businesses at risk.
The approval allows the companies to access the reduced tariff for 12 months starting January 2026.
The arrangement is conditional on the government covering the difference between the standard and discounted rates.
Details of the new tariff structure
Under the new approval, the two companies will pay 87.74 South African cents per kilowatt-hour, down from the current tariff of 1.36 rand per kilowatt-hour, for the 12-month period beginning January 2026.
NERSA official, Willibrod Majola, said during a virtual briefing that the approval is conditional on the South African government covering the tariff shortfall to ensure standard electricity customers do not absorb the cost difference.
Majola said the regulator considered the distressed state of the ferrochrome sector and Eskom’s submission that the relief was necessary to prevent immediate job losses at the affected smelters.
Eskom supplies over 90% of South Africa’s electricity. It has received several requests from industrial users for tariff relief as prices keep rising.
At the same time, the utility is dealing with its own operational and financial challenges.
Electricity costs drive smelter closures
Ferrochrome production requires continuous high-temperature smelting to combine chromium ore with iron, making it among the most electricity-intensive industrial processes.
According to industry data cited by the International Chromium Development Association (ICDA), electricity accounts for a significant share of production costs.
More than a dozen ferrochrome smelters have closed in South Africa in recent years and industry representatives have attributed many closures to electricity tariff increases exceeding 900% since 2008, according to Minerals Council data.
Samancor Chrome and the Glencore-Merafe joint venture both signalled late in 2025 that continued smelting operations were no longer economically viable under existing power prices.
The companies cited sustained losses and an inability to compete with producers in lower-cost energy markets.
South Africa remains the world’s largest producer of chrome ore, according to the U.S. Geological Survey (USGS), but has lost its leading position in processed ferrochrome to China, where electricity costs are lower and supply is more stable.
ICDA data shows that while South Africa still dominates raw chrome exports, a growing share of ferrochrome used in global stainless steel production now comes from Chinese smelters.
The tariff relief approved by NERSA applies only to processing operations and does not affect chrome mining activities. Ferrochrome is primarily used in stainless steel production, linking the sector to global steel demand.
Eskom’s industrial support measures
Eskom’s application to NERSA forms part of a pattern of targeted electricity pricing interventions aimed at retaining large industrial customers.
In previous years, the utility has entered into special pricing arrangements with energy-intensive users, subject to regulatory approval.
According to Eskom’s December submission to NERSA, the ferrochrome tariff proposal was designed as a short-term measure while longer-term solutions for industrial electricity pricing are explored.
It noted that smelter closures reduce electricity demand but also weaken the utility’s industrial customer base, particularly during off-peak periods when large users help stabilise grid utilisation.
The bottom line
The tariff reduction runs for one year and applies only to Samancor Chrome and the Glencore-Merafe Chrome Venture. NERSA has not indicated whether it will extend similar relief to other smelters or energy-intensive industries.
The Department of Mineral Resources and Energy has not yet published details on the funding mechanism for the tariff shortfall.
Majola confirmed during the January 29, 2026 virtual briefing that NERSA’s approval depends on the state providing the necessary financial backing to cover the difference.
Parallel discussions are underway on a longer-term solution, including a further reduced tariff target of around 62 cents per kilowatt-hour. The current measure provides temporary support while these discussions continue.
