Silicon metal and ferroalloys producer Ferroglobe South Africa has warned that it may be forced to stop operations at all its facilities owing to a prolonged and unprecedented escalation in electricity prices.

Ferroglobe says without confirmation of reduced tariffs for its operations before April 1, it will have no alternative but to start a retrenchment process for all its remaining staff, with dismissals anticipated to take effect from June.

CEO Marco Levi says energy costs have reached levels that render continued operations financially unviable despite decades of investment, industrial commitment and continuous efforts having been made to sustain production.

Unless the proposed reduced electricity tariffs for some stakeholders are extended to Ferroglobe’s operations before April 1, it will have no option but to halt production in South Africa.

Power utility Eskom has been in talks with some of the country’s ferrochrome producers about a lower electricity tariff in an effort to halt the closure of smelters. 

Ferroglobe started operating in South Africa in 1997 with the acquisition of the Polokwane Silicon Metal smelter, followed by the acquisition of eMalahleni Ferrosilicon smelter in 2008.

The company also invested in five quartz mining operations and grew to become the largest charcoal producer in Southern Africa. It remained the only African silicon metal producer for decades up to the company’s potential closure.

Silicon metal is used in aluminium, chemical, solar and defence applications, while ferrosilicon is essential for steel and stainless steel production.

Ferroglobe explains that electricity prices have increased by more than 900% since 2007 and now account for more than 50% of the company’s total production costs – reaching well above selling prices.

This has created a severe competition disadvantage when compared with international producers operating in more protected markets or in regions where electricity prices are lower than in South Africa.

In particular, Ferroglobe says the construction of competing facilities in neighbouring countries has benefitted from significantly more competitive electricity pricing.

Ferroglobe put its Polokwane smelter on care and maintenance in 2024, which led to a retrenchment process that affected more than 300 employees, contractors and service providers. At the eMalahleni operations, production capacity was reduced by 30% in 2024.

“The upcoming Eskom tariff increase of nearly 9% from April 1 further exacerbates the situation, making continued operations impossible after several consecutive years of financial losses.

“Without a viable, long-term electricity pricing framework, we cannot continue to absorb operational deficits,” the company states, adding that it may relocate production to Ferroglobe facilities outside of South Africa where conditions are more supporting of industrial activity.

Cessation of Ferroglobe’s local operations would have far-reaching consequences across the value chain, including for its 275 permanent employees, 288 long-term contractors and about 3 900 indirect workers. There are an estimated 60 000 indirect workers across Ferroglobe’s charcoal division.

Levi deems the impending halt of the company’s operations an “extremely difficult” moment for the company and for its thousands of dependants.

“We have invested consistently for nearly three decades, but no business can survive energy costs that have risen at this scale. We stand ready to work with all stakeholders to find a viable long-term solution that preserves jobs, supports communities and allows this strategic sector to continue contributing to the local economy,” he notes.