TATA Steel KZN froze activities at its Richards Bay ferrochrome plant for the winter months following Eskom’s electricity tariff increase of 12.7% in April.
The company is temporarily halting production owing to the higher cost of power and low price of ferrochrome in a currently sedate market.
Tata’s Bay facility produces 150 000 tons per year (tpy) of high carbon ferrochrome, also known as charge chrome, from locally supplied ores, and exports the alloy of chromium and iron to Asia, Europe and the USA for the manufacturing of stainless steel.
The news hits home hard only one week after a representative from the Ferro-Alloys Producers Association, Jacobus Zaayman, warned that another 12.61% tariff raise proposed by Eskom could lead to as many as 200 000 job losses in the South African ferrochrome industry.
SA is one of the world’s biggest ferrochrome producers – the second reason Tata invested in Richards Bay.
Cheap electricity was the first.
In June 2007, when the local plant was still being constructed, Tata Steel KZN Managing Director Somdeb Banerjee stated the latter almost to the point.
‘South Africa is ideal for the production of ferrochrome primarily owing to two reasons: cheap electricity and dominance of South Africa in the ferrochrome industry,’ Banerjee said.
Job losses
It is unclear if Tata’s shutdown resulted in permanent job losses – the company declined to comment on the matter.
However, economists are forecasting a jobs bloodbath if Eskom gets its way.
Deputy Dean in the Faculty of Commerce Administration and Law at the University of Zululand (Unizul), Dr Irrshad Kaseeram, last Thursday raised the alarm on the heavy impact the ballooning price of electricity will have on Richards Bay as Zululand’s industrial hub.
‘Such an increase will make all our manufacturing and mining industries – intensive electricity users – grossly uncompetitive.
‘Marginal firms will shut down and multinational corporations will shift their production processes to other lower cost destinations.
‘This will have a detrimental effect on employment both for Richards Bay and the country as a whole.’
