Mittal warns of further closures if power prices continue to surge
Steel producer ArcelorMittal South Africa warned last week that some of its facilities had already closed as a result of the steep electricity price rises between 2007 and 2012, while others could reach a “tipping point” should Eskom’s application for five yearly tariff increases of 16% between 2013 and 2018 prevail.
The JSE-listed company is one of Eskom’s top ten customers, consuming about 2.5% of the utility’s yearly sales.
Presenting on the first day of the National Energy Regulator of South Africa’s (Nersa’s) public hearings, the group’s energy specialist, Dennis Britz, directly attributed the recent closure of the group’s electric arc furnaces in Vanderbijlpark to higher electricity costs.
The plants were closed in October last year, shaving 1.2-million tons from the group’s steelmaking capacity and affecting 400 employees, who were redeployed elsewhere within the organisation.
Britz argued that Nersa held South Africa’s economic fortunes in its hands, as the proposal to transition Eskom’s average tariff from 61c/kWh to 128c/kWh would undermine “South Africa’s ability to produce, beneficiate and expand economically”.
He also appealed for subsidies to be removed from the electricity tariff, reporting that Mittal would pay up to R300-million towards levies and subsidies related to its 2012 electricity use.
The company proposed that the National Treasury become responsible for these subsidies, as sustaining them as an “input cost” placed companies at risk of closure.
Britz said that Mittal’s ability to mitigate power price increases through own- and cogeneration and energy efficiency initiatives was constrained technically and also limited by policy uncertainty.
He called for a more market-friendly approach to facilitating the entry of independent power producers.
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