Eskom willing but Transnet won’t play ball with Saldanha Steel

Eskom has approached energy regulator Nersa for approval of a special pricing agreement that could lead to the reopening of the ArcelorMittal (AMSA) Saldanha Steel plant on the Cape West Coast.

The nature of its operations will however change from the production of high quality ultra-thin hot rolled coil to processing local scrap metal.

The reopening may result in 260 new jobs for employees and an additional 357 for contractors.

Nersa’s approval is however only one of the hurdles AMSA will have to clear.

The other essential requirement is “tariff support” for rail and port logistics from Transnet, as well as a commitment to the required capacity and a reliable service, according to AMSA spokesperson Tami Didiza.

AMSA requested this assistance from Transnet Freight Rail (TFR) in 2020 but received an unfavourable response.

TFR responded that it does not have the capacity to service the logistic requirement of the steel mill and cannot offer a reduced tariff, Didiza said.

The two parties are still trying to find a solution, but the timeline is unclear, he added.

Closure

Saldanha Steel closed down in 2020 when it was unable to compete internationally with other producers. Since then, the plant has been in care and maintenance.

At the time the local chamber of commerce described the closure as a disaster for the West Coast economy as 900 people working for Saldanha Steel and its contractors lost their jobs.

Having gone back to the drawing board, AMSA resolved that it could utilise the plant for the processing of scrap metal, provided it gets the required concessions from Eskom and Transnet as well as support from the Saldanha Bay local municipality and the Western Cape government.

AMSA’s request for a three-year special pricing agreement has been processed by Eskom and now just needs Nersa’s approval to implement it.

Nersa has published the application for public comment.

It is not clear how big a discount Eskom wants to give Saldanha Steel. The application is however done in terms of a framework developed by the Department of Trade, Industry And Competition (dtic) that ensures that Eskom covers at least its fixed cost.

According to the discussion document published by Nersa, Eskom’s electricity sales to its most important energy intensive users has dropped since 2008 by 16 terawatt hours (TWh) to 74TWh. A fully functioning Saldanha Steel will need 1.3TWh, but this recovery plan provides for demand of 700 gigawatt hours (GWh).

Plans for the plant

AMSA hopes to produce 600 000 tons of ultra-thin steel products and thereby create a further 3 222 indirect job opportunities in the region.

A portion of the product will be exported, but some will be destined for neighbouring Duferco Steel Processing for beneficiation. This will also improve the sustainability of that plant, according to Eskom’s application.

In the meantime AMSA says it is also working with the Western Cape government towards generating its own electricity.

According to the office of Western Cape Minister of Finance & Economic Opportunities David Maynier, his department, the West Coast District Municipality and Saldanha Bay Municipality have been working closely with AMSA via the West Coast Business Development Forum in recent years, looking at energy (mainly gas-to-power) and water (mainly the reuse of waste water) solutions as well as liaison with the dtic and other public stakeholders.

Read: ArcelorMittal signs IPP agreement at its Saldanha operation

While the provincial government’s engagements with Transnet are mostly focused on improving the ports, it said the importance of rail transport as part of the solution for AMSA could require further assistance from both the economic and transport departments.

Didiza said without access to competitive rates and the necessary capacity from TFR, a restart of the Saldanha Works seems unlikely in the short term.

“Despite this, ArcelorMittal South Africa remains committed to finding a viable solution for its Saldanha asset, and is exploring various opportunities, including use of the asset as a green production facility in the medium term. However, access to reliable and cost-effective rail services remains a fundamental enabler,” he said.

Nersa’s closing date for written comments on the special pricing agreement is April 5.