NEWSBREAK: Glencore evaluating viability of all of its chrome assets in South Africa
Glencore has embarked on a thorough review of the sustainability of its chrome facilities in South Africa in response to weak chrome prices and high electricity costs.
The company has triggered Section 189 of South Africa’s labor relations act for all employees at each of its chrome ore and alloy facilities there. Section 189 is a South African legal requirement representing an intention to retrench staff.
“The decision is a result of the worsening operating environment across the South African ferro-chrome industry, including unsustainable electricity pricing. Despite significant investment to make the operations more competitive, the company has continued to come under substantial operational and financial pressures,” Glencore said in a statement on Thursday June 18.
Said one market source: “There is a full evaluation of all assets to decide which make sense in the long term. Glencore is starting from the bottom up and looking at every mine, every furnace and every employee before putting the pieces back together and making the business future-proof.”
The operations impacted by the process are the Lydenburg, Wonderkop, Boshoek and Lion smelters.
The Section 189 process will also impact the Helena, Magareng and Thorncliffe chrome mines, situated on the eastern limb of the Bushveld Igneous Complex; and the Waterval and Kroondal chrome mines near Rustenburg on the western limb.
Employees at Kroondal had already been told the mine would not restart despite the easing of lockdown measures in South Africa.
All 895 employees of the Lion smelter were informed by management, in a letter seen by Fastmarkets and dated June 17, that the business was being reviewed.
The company has begun a consultation process with its employees “to discuss the options and alternatives to save the operation or reasons that could lead to possible job losses,” according Andre van Zyl, general manager of the Lion smelter.
“It is with a regret that Lion Smelter has the need to announce that we have come to a point where the long-term financial sustainability of our business is under threat,” he said.
Staff there will enter a consultation process that should be completed within 60 days.
Glencore’s full-scale strategic review of the business began in January, with plans to restructure its Rustenburg ferro-chrome smelter due to deteriorating conditions in the ferro-chrome market and high power costs.
The review has since been widened.
“This has been brought about by a sustained downturn in the chrome market, unsustainable electricity pricing, fixed production and labor costs as well as outdated operational practices,” van Zyl said in the letter.
Ferro-chrome prices have struggled to recover from multi-year lows in March 2020 due to weak consumption, poor downstream demand and excess supply, with China ramping up its own production.
Fastmarkets’ price assessment for ferro-chrome, 50% Cr, import, cif main Chinese ports, was $0.73 per lb on June 12, up $0.06 per lb from a multi-year low in March.
Adverse market conditions have put South Africa’s entire ferro-chrome market under pressure.
In January 2020, Samancor Chrome - South Africa’s largest ferro-chrome producer - announced plans for restructuring its mining and smelting operations in response to the “drastic” chrome price decline.