Nersa
By Thabo Mosia
Nersa has approved an application from ArcelorMittal South Africa for relief on the price it pays Eskom for electricity at its Newcastle and Vanderbijlpark plants, despite Eskom’s earlier rejection of the request on grounds that the steelmaker does not qualify for discounted tariffs under the existing framework.
Introduction to the Decision
The National Energy Regulator of South Africa (Nersa) made a key decision during its meeting on Thursday, 28 August 2025. It gave the green light to ArcelorMittal South Africa (Amsa), the country’s biggest steel producer, for a special deal on electricity costs from Eskom. This relief applies specifically to Amsa’s plants in Newcastle and Vanderbijlpark. Eskom had turned down Amsa’s initial request, arguing that the company did not meet the rules for getting lower tariffs. But after a review and public input process, Nersa decided otherwise.
This move comes at a time when Amsa is facing tough times in the steel market. Competitors have raised alarms about what they call “predatory pricing” by Amsa, where it sells steel at prices below what the market expects to push out rivals. These competitors have even gone to the Competition Tribunal to try to stop Amsa from doing this. On top of that, Amsa recently got a big financial boost – a R1.7 billion bailout from the state-owned Industrial Development Corporation (IDC). This help was meant to keep the company going and save jobs, but it has sparked debates about fairness in the industry.
Background on ArcelorMittal South Africa’s Challenges
ArcelorMittal South Africa is part of the global ArcelorMittal group, which is one of the world’s top steel makers. In South Africa, Amsa runs major operations that produce steel for building, cars, and other sectors. However, the company has been hit hard by several problems over the years. High costs for raw materials, like iron ore and coal, have eaten into profits. Electricity, while not the biggest cost, still plays a role in keeping plants running smoothly.
In recent times, Amsa has dealt with issues like poor rail services from Transnet, which makes it hard to move goods. This led Amsa to take Transnet to the Competition Tribunal for what it calls market abuse. Cheap steel imports, especially from places like China, have flooded the market, making it tough for local producers to compete. As a result, Amsa warned in the past that it might shut down some operations, which could lead to thousands of job losses.
To help, the government stepped in with measures like higher import duties on steel to protect local jobs. The IDC’s R1.7 billion injection was part of this support, aimed at keeping plants open and maintaining supply chains. Without such help, experts say the downstream steel industry – which includes smaller firms that use Amsa’s steel to make products – could suffer even more. Already, some say that protecting big players like Amsa has cost the country around 200 000 job opportunities in smaller businesses.
Amsa’s share price has shown ups and downs amid these events. As of 29 August 2025, at 16:55, the ACL stock for ArcelorMittal South Africa Ltd hovered between 0 and 3, reflecting investor worries about the company’s future. Charts from January to May 2025 show similar volatility, with the price reacting to news about bailouts and tariff talks.
Details of the Electricity Relief Application
Amsa applied for what is called a Negotiated Pricing Agreement (NPA) under the long-term framework. This is a special deal for big electricity users who can prove they need lower prices to stay in business. Nersa sets strict rules for who qualifies. These include:
The business or sector must not be able to survive long-term on normal tariffs, and needs a long-term NPA.
Electricity must be one of the top three biggest costs for the operation.
The company should align with South Africa’s key industries that the government wants to support.
It must use at least 80 GWh of electricity per year, or have a load factor over 70%.
Even companies in business rescue or that have closed can apply.
In its application, Amsa said it consumes about 1% of Eskom’s total power output, which is a huge amount. It asked for a 72-month discount for each plant. But details on the exact discount percentage were kept private in the public version on Nersa’s site. Amsa admitted that cheaper electricity alone would not fix all its problems – it needs other fixes like better logistics and market protection.
However, not everything matched the rules perfectly. Neither the Newcastle nor Vanderbijlpark plant hits the 70% load factor mark, sitting at around 63%. Electricity makes up less than 10% of total costs, and the energy used per ton of steel is under 1 MWh/t. Despite this, Nersa decided Amsa complies “on a balance of scale,” meaning it meets enough of the criteria overall. This is similar to past decisions by the regulator.
The Department of Trade, Industry and Competition backed the application, seeing Amsa as vital to the economy. Nersa sent the matter back to Eskom and Amsa to work out the fine details of the deal.
Eskom’s Rejection and Warnings
Eskom said no at first because Amsa did not fully meet the NPA rules. It worried that approving this could open the floodgates for others. There are at least 130 big power users who might not qualify but could ask for the same treatment. Eskom warned this might force a 25% hike in tariffs for everyone else to make up for lost money.
These NPAs have been in the news lately. Last year, Eskom said in its tariff request that 5 percentage points of a 32% increase were needed to cover losses from these deals. Overall, a small group of giant users takes 17% of South Africa’s electricity at big discounts. This has raised questions about fairness, as regular users and small businesses end up paying more.
Industry Reactions and Concerns
Reactions from the steel and energy sectors are mixed. Nellis Bester, chairperson of the Ferro-Alloy Producers’ Association (Fapa), which includes smelters that have had NPAs before, said saving Amsa is important for the whole country. But he stressed that changing the rules for one company means the whole system needs a rethink. He believes import tariffs are a better way to help the steel sector than electricity discounts. Without proper changes, it could lead to chaos if every big user starts applying.
Gerhard Papenfus, CEO of the National Employers’ Association of South Africa (Neasa), was stronger in his views. He said Amsa’s plants are old and not efficient with electricity. The parent company, ArcelorMittal International, has not invested enough here. Papenfus argued it is unfair to make other electricity users subsidise Amsa. With the IDC bailout and import duties, someone else always pays the bill. He claimed that protecting Amsa is hurting the downstream industry, saving 3 500 jobs at Amsa but costing 200 000 potential jobs elsewhere.
Competitors worry about price distortions. If Amsa gets cheaper power, it could sell steel even lower, making it harder for others to compete. This ties into the Competition Tribunal case, where rivals want to stop what they see as unfair pricing.
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