Samancor joins a growing list of SA’s mining companies retrenching
The world's second-largest ferrochrome producer could shed nearly 2,500 jobs. Weak chrome prices and Eskom blamed
Samancor Chrome, one of the world’s largest sources of the stainless steel ingredient, warned its unions on Monday that it could cut up to 2,488 jobs because of a global downturn in the chrome price and a rise in Eskom’s electricity prices.
State-owned electricity monopoly Eskom is a common theme running through recently announced job cuts at the Glencore and Merafe Resources joint venture smelter in Rustenburg.
The Minerals Council SA has warned that further increases in electricity prices would harm the mining industry and downstream industries such as smelting and refining.
Business singles Eskom out as the biggest crisis facing SA’s economy, and it has, through Business Unity SA, the council and other bodies, called for urgent action from the government to fix the power utility, one of the state businesses at the forefront of corruption and mismanagement.
Eskom has hiked electricity tariffs 523% since 2006 for its large industrial clients such as mines and smelters. But it has at the same time become an erratic and unreliable source of power as it struggles with a fleet of aged coal-fired plants and bringing its new operations into production.
“The chrome-ore market in particular has been under huge pressure, with a drastic decline of ore prices, especially during the past three months,” Samancor said in the section 189 notice it issued to its employees in terms of the Labour Relations Act.
“This drop in the chrome-ore prices, linked with the continuous increase of cost of production and low productivity, makes the situation unsustainable,” said the privately held company.
Two notices were issued to Samancor employees, warning that 2,438 positions at its Eastern and Western chrome mines could be cut and that 50 management positions were also under review. The notices give a 60-day period to consult unions and other stakeholders to find alternatives to job cuts.
Samancor employs 5,714 people at its mines near Rustenburg in North West and in the Lydenburg /Steelpoort area of Limpopo. The mines can generate about 2-million tonnes of chrome ore a year for the domestic and export markets. With its four ferrochrome plants, which are heavy electricity consumers, Samancor says it is the world’s second-largest source of ferrochrome, with a capacity of more than 1-million tonnes a year.
Glencore and Merafe said last week it could cut up to 665 jobs at its Rustenburg smelter because steep price hikes from Eskom plus SA’s new carbon tax, combined with aged furnace technology, contributed to the smelter being “no longer financially viable to operate as a going concern”.
Tharisa, a chrome-ore and platinum-group metals miner, warned in November that the fall in chrome prices was leading to small-scale chrome producers closing and others curtailing production.
“I think what we’d expect to see is a consolidation play across the chrome industry. The bottom line — prices, where we see them now, are not sustainable and cannot possibly benefit a chrome-only producer,” Tharisa COO Michelle Taylor said at the time.
According to Metal Bulletin data, the price for the benchmark SA UG2 chrome-ore concentrate with 42% chrome content delivered in China was $136/tonne this week. This is well below the $183/tonne in March 2019 and the $140/tonne in November. In early 2018, the UG2 price was well above $200/tonne.
“Current prices are not sustainable, given the cost curve of many chrome producers, which will in part help spur a recovery of prices in 2020,” Greg Taurog, Tharisa’s marketing and sales director, said in November.