South Africa's Merafe Resources, which produces ferrochrome in partnership with Xstrata plc, may consider cutting staff if state-owned power utility Eskom Holdings' request for a nominal 34% tariffs increase is approved, according to a newswire service.
It is reported that Eskom is trying to boost its revenue, which has fallen because many producers have shut down or reduced production and are therefore using less electricity.
While Merafe had budgeted for a 25% increase, 34% is too much and would add substantial pressure to costs, forcing the company to review its situation, according to the newswire service.
The newswire service also reported that the company is currently operating only three out of its 20 furnaces due to weak market conditions, a reduction of about 80% of its normal capacity, or around 1.3 million tons of ferrochrome on an annualized basis. If the three furnaces currently running are still required to service customers, it will have to look at cutting costs elsewhere. The company said as staff also makes up a huge component of its costs, it might have to look at cutting costs there.
The company, which has around 6,000 full time employees, has so far avoided any retrenchments, having cut only contract workers.