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Eskom seeks longer buyback deals with ferroalloys sector

Keywords: Tags  Eskom Holdings, ferrochrome, ferroalloys, power buyback, energy provider, Janie Davies

LONDON — Eskom Holdings SOC Ltd. wants to extend power buyback deals reached in recent months with ferroalloy producers in South Africa, AMM sister publication Metal Bulletin has been told.

Eskom reached deals in November under which producers cut output and sold electricity back to the Sandton, South Africa-based state energy group.

All South African ferrochrome producers are said to have participated in the latest round of agreements, most of which are scheduled to expire in late March.

Eskom is now seeking to extend the arrangements, but so far there have been no official announcements from participating producers, market sources said.

"I’ve heard word of this, but I haven’t heard if anyone is going to extend," one market source said.

The approaching second quarter is normally the most profitable of the year for ferrochrome producers, when prices peak. After the second quarter, prices usually drop and production costs rise due to the more expensive winter power tariff.

"Each producer will have to consider its own position carefully," the market source said.

Negotiations for the current deals were tougher than those of a year earlier because Eskom reduced the price at which it would buy back power, sources said.

"One of the reasons for (the tougher negotiations) was that the incentives were not as generous as last time round," the source said.

The terms of the deals state that participating companies must fulfill all contractual obligations and must not cut jobs as a result of the production cuts.

A version of this article was first published by AMM sister publication Metal Bulletin.

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