A sector under structural pressure from rising energy costs
South African ferrochrome producers have faced structural pressure for two decades. Electricity costs have risen tenfold since 2008, while competition from Chinese producers has intensified. Of the 66 smelters the country once operated, only 11 remain active. South Africa, the world’s biggest chrome ore producer, has ceded its position as the top processor of chrome into ferrochrome to China, primarily due to this energy cost differential.
Merafe Resources had suspended production at its Boshoek, Wonderkop and Lion smelters in May 2025, citing viability concerns. Mass layoff proceedings were initiated the following September. According to industry data, the joint venture — in which Glencore is said to hold 79.5% and Merafe Resources 20.5% — is said to operate five smelters equipped with 22 furnaces in South Africa, with a total installed capacity reportedly reaching 2.3 million tonnes of ferrochrome per year.
A tariff agreement negotiated jointly by the industry
The preferential tariff was negotiated jointly by Merafe Resources and fellow ferrochrome producer Samancor Chrome with NERSA. According to market sources, the agreement would fall under a framework of Negotiated Pricing Agreements (NPA) and would succeed a 12-month emergency measure approved in January 2026 at 0.8774 rand per kilowatt hour, a level the industry considered above the breakeven threshold for most smelters. NERSA extended the benefit of the new tariff to the entire ferrochrome industry.
Merafe described the decision as « a further step towards stabilising operations and progressing the phased restart of the business. » The Lion smelter, located in Limpopo province, reportedly has a capacity of 720,000 tonnes per year according to industry data. The Wonderkop and Boshoek sites, both located in North West province, are said to represent 553,000 and 240,000 tonnes per year of installed capacity respectively.
Competitiveness against China, the sector’s central challenge
Ferrochrome, an alloy of chrome and iron primarily used in stainless steel production, is an energy-intensive product. The gap between the preferential tariff now granted to smelters — 0.62 rand ($0.0382) per kilowatt hour — and the residential tariffs charged by Eskom, said to stand around 2.00 rand according to market data, illustrates the extent of the support granted to the sector. China, which benefits from structurally lower energy costs, has progressively captured the bulk of global chrome processing. The phased restart of the joint venture’s smelters now hinges on the durability of the tariff framework validated by NERSA.