Glencore-Merafe Chrome, one of the leaders in the global ferrochrome market with 2.3 million mt per year production capacity, is seeking to take some measures in order to minimize the effect of unfavorable business conditions.
As a result of the challenging operating and market conditions across the South African ferrochrome industry, including unsustainable electricity tariffs and supply interruptions, cross subsidies and real cost inflation, Glencore-Merafe has commenced a restructuring process.
On January 20, the company stated its intention to retrench staff at its Rustenburg ferrochrome smelter in South Africa. The facility’s annual capacity is 430,000 mt of ferrochrome. Taking into account that ferrochrome is an electricity-intensive product to manufacture, the solidly increasing energy tariffs and load shedding by Eskom, the state-owned power utility, have had a direct impact on the company’s operating efficiency. “Despite significant investment to make the operation more competitive, the Rustenburg Smelter has suffered material financial losses which are expected to continue for the foreseeable future,” Merafe Resources said in its official statement. Last year, Eskom had approved a 13.87 percent average electricity tariff increase, SteelOrbis has learned.
In addition, the business conditions in the global ferrochrome market have been challenging amid imbalanced supply and demand. The European ferrochrome benchmark price for the first quarter of 2020 has been settled at $1.01/lb Cr, down one percent compared to the previous quarter.
In terms of restructuring, Merafe Resources will directly hold a 100 percent interest in Merafe Ferrochrome and Mining Limited, not through its wholly-owned subsidiary Merafe Chrome and Alloys Limited. This restructuring is expected to take place on or about January 24.