Glencore weighs 665 job losses at South African smelter

Glencore and its joint venture partner Merafe Resources could cut up to 665 jobs at their Rustenburg ferrochrome smelter as it battles rising electricity tariffs and power cuts.

The review the latest example of the risks to South Africa’s mining industry posed by the unreliable and increasingly expensive electricity supply from Eskom, the struggling power monopoly.

The Swiss-based miner and trader said “unsustainable electricity tariffs and interruptions, cross subsidies and real cost inflation” are contributing to higher costs of producing ferrochrome — an ingredient in stainless steel — in South Africa.

In a statement, the joint venture said it had notified employees at its Rustenburg smelter that it was beginning a consultation process to “secure the future of the operation” after it “suffered material financial losses which are expected to continue for the foreseeable future.” It added that “lower-cost competitors overseas” had displaced production at Rustenburg.

A spokesperson for Glencore in South Africa, confirmed that 665 jobs would be part of the review process but said that it is “difficult to pre-empt anything”. The spokesperson declined to specify the volume of production displaced.

China has become the world’s biggest producer of ferrochrome, while South Africa is the second largest, with an output of 2m tonnes of the feedstock material — over a quarter of global supply — in the first half of 2019, according to Merafe.

This is not the first time that mining companies have been forced to take action because of South Africa’s troubled state electricity utility. When Eskom implemented record rolling power blackouts in December last year, it forced platinum group metals and diamond producers to temporarily shutter operations.

Glencore produced 1.58m tonnes of ferrochrome globally in 2018 and it holds a total smelting capacity of 2.3m tonnes per year in South Africa, of which Rustenburg makes up 430,000 tonnes.

It has four other ferrochrome smelter complexes in the country, which the spokesperson said the company was monitoring, adding that Rustenburg “seems to be the site that is experiencing issues at this stage”.

Analysts at Berenberg said that the restructuring at the Rustenburg smelter has “has the potential to remove tonnes from the market” and lift prices for ferrochrome, which have been unsustainably low for some producers.