Eskom’s 18% electricity tariff hike for April 2023 has been approved by the National Energy Regulator of South Africa (Nersa). A further 12.74% increase is approved for April 2024.

The announced increase means that over the past 15 years, electricity costs in South African rand have increased by over 700%. South Africa, once the leader in ferrochrome production underpinned by highly competitive energy prices, is facing challenges to remain competitive with its cost position roughly at parity with producers in China (a country relying on South Africa for the majority of its chromite).

A saving grace that has allowed some, but not all, South African ferrochrome plants to survive has been a depreciating South African rand. Thanks to exchange rates, energy costs have ‘only’ ramped up around 250% in US dollar terms.

Last year, energy crises in Europe and China meant that South African ferrochrome production made gains, ending the year in the lower-cost half of the industry cost curve.

Thanks to a strong dollar, the 18% hike will still see South African operations in a mostly favourable position against China’s lowest-cost production in Inner Mongolia. However, the dollar is expected to lose some of the ground gained. Modelling an exchange rate equivalent to 2021 sees all but three South African plants remain in the lower-cost half of the ferrochrome industry.