Ferroglobe has (again) announced its intention to restart its Polokwane silicon metal plant, which has been idle since 2019. The decision to restart the facility was made as a result of the market’s rising demand for silicon metal. 

This is not the first time that Ferroglobe has announced the restart of its South African plant this year, having indicated positive market conditions back in April. 

The South African silicon smelter relies on the parastatal electricity supplier, Eskom. In 2018, Ferroglobe and Eskom entered into an ‘evergreen’ supply agreement, in which the smelter was offered a two-year discount over the public tariffs on the electricity consumed to produce silicon metal. Due to decreasing silicon metal prices in 2019, the agreement was terminated, and the smelter was placed under care and maintenance until the market for silicon metal recovered. 

South African ferroalloy and metal smelters have faced challenging competitive margins, as electricity costs in the country have soared. While a depreciating rand currency has allowed several plants to remain competitive in US$ terms, the oversupplied steel market in 2019 saw several suspensions in South Africa. 

Eskom continues to ramp up electricity tariffs amid struggles to keep the country’s lights on but with the US$:ZAR exchange back close to record levels helps shift the position of smelters on global cost curves. This is especially true with rising energy costs in Europe and China impacting competing operations, supporting Ferroglobe’s decision to (maybe) go ahead with restarting the plant.