Johannesburg - An 800 megawatt compressed natural gas (CNG) power plant expected to reduce electricity costs was on the cards for ArcelorMittal South Africa’s Saldanha Steel plant in the Western Cape, Richard Holcroft, the general manager for the plant, said yesterday.
“It is an exciting prospect for us and it will be good for the economy in terms of job creation, if we can pull it off,” Holcroft told journalists during a visit yesterday.
Energy makes up 44.2 percent of Saldanha’s costs. The steel plant has a 160MW demand for power at a cost of R750 million a year. Soaring electricity prices have added R425m to ArcelorMittal SA’s cost base.
A Canadian consortium involved in similar projects in Africa, had approached Saldanha Steel, Holcroft said, adding that ArcelorMittal SA had discussed the possibility of an off-take agreement with Eskom.
“This will be a huge capital investment project… It will present opportunities, including beneficiation, that have been stopped because of the power constraints and higher cost,” Holcroft said.
Saldanha Steel’s competitive advantage has eroded over the years amid price increases due to the iron ore dispute between ArcelorMittal SA and Kumba Iron Ore, Eskom price hikes and flat global demand for steel.
Should the project receive a green light, gas is expected to be imported from countries including Angola. However, red tape is likely to hinder the progress of the project because of timelines for terminal licences, which can take up to four years.
“The alignment between the various departments to assist and expedite development is not always a priority. The reality is that South Africa can lose out on the opportunity because if it takes eight years for a plant to be built [here], investors will go where it will take three years,” Rienet Van Zyl, Saldanha Steel’s business development manager, said.
Eskom requested that the plant cut power by 10 percent on Tuesday, and that had resulted in a production loss of 200 tons, Van Zyl said.
ArcelorMittal SA has complied with the demand to reduce power consumption by 10 percent during peak periods. Eskom lifted the emergency declaration to cut power late yesterday.
Company spokesman Themba Hlengani said: “To achieve uninterrupted production at the Vanderbijlpark works, we are focusing on maximising the production of internally generated electricity. Our current projections are that there will be no impact on deliveries.”
Eskom’s electricity buy-back programme resulted in a 27 percent drop in commercial sales last year.
The Saldanha Steel plant is also mulling the establishment of an 18MW co-generation plant and has completed a prefeasibility study with Exxaro Resources, which will boost beneficiation. - Business Report