JOHANNESBURG (miningweekly.com) – The application of State electricity utility Eskom for a six-year negotiated pricing agreement for the Glencore-Merafe ferrochrome smelter operation in Rustenburg, in the North West Province, has been approved by South Africa’s energy regulator Nersa.

This follows the ruling by the North Gauteng High Court on November 10 that Eskom is the supplier of the Rustenburg smelter and not the Rustenburg municipality.

The court further ruled that Nersa must assess the Glencore-Merafe application in terms of the interim framework for long-term negotiated pricing agreements.

This framework focuses on retaining South Africa’s priority and strategic sectors such as the ferrochrome production sector. It targets large power users with minimum consumption thresholds of 80 GWh and/or load factors greater than 70% and where electricity is a large cost component.

Ferrochrome is a key ingredient in stainless steel, a recyclable corrosion-resistant product, with 90% of the ferrochrome produced used in stainless steel and speciality steels.

Eskom submitted a six-year negotiated pricing agreement application for each of the five Glencore-Merafe ferrochrome smelter operations in Mpumalanga, Limpopo and North West in line with the interim framework for long-term negotiated pricing in May.

At its meeting on October 26, Nersa approved four of the five Glencore-Merafe chrome ferrochrome smelters directly supplied by Eskom.

However, Rustenburg Glencore Operations was excluded from Nersa’s approval process to allow the Rustenburg municipality to make its own application on behalf of the Rustenburg smelter as required by the interim framework for long-term negotiated pricing agreements.

This was based on Nersa’s understanding that the supplier was Rustenburg municipality and not Eskom.

Subsequently, Nersa processed the application following the ruling by the North Gauteng High Court that Eskom is the supplier of the Rustenburg smelter and not the local authority.

The negotiated pricing agreement under the interim framework facilitates the offering of incentive pricing for South African industries to operate competitively in their respective sectors.

Glencore-Merafe has focused on efficiency improvements over the years. However, further improvements require substantial capital investment, which is not being done due to the uncertainty of sustainability with the increasing electricity tariffs, Nersa states in its media release to Mining Weekly.

The negotiated pricing agreement is set at a level to ensure Glencore-Merafe’s sustainability while covering Eskom’s cost to serve.

Glencore Operations South Africa in North West has a consistent power demand of 225 MVA 24 hours a day, seven days a week throughout the year and removes the time of use and seasonal fluctuation in prices.

In doing so, it increases price and planning predictability for the smelter and certainty to Eskom of the smelter’s demand.