Tata Steel KZN shuts furnaces to aid S.Africa's Eskom - sources

JOHANNESBURG/LONDON Fri Jan 11, 2013 9:31pm IST

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JOHANNESBURG/LONDON (Reuters) - Tata Steel KZN, a subsidiary of the Indian steel maker (TISC.NS), has shut two ferrochrome furnaces in South Africa for two months to help power utility Eskom manage a tight electricity supply, industry sources said on Friday.

Officials at Tata Steel KZN and Eskom ESCJ.UL declined to comment.

Under deals with Eskom, companies agree to temporarily suspend production, allowing the utility to buy back the energy that would have been used by the furnaces and feed it back to its starved electricity grid.

The deals are normally net positive for the companies, which use stocks to supply customers.

The Tata-Eskom deal follows shutdowns by other ferrochrome producers in the country, including a joint venture between Merafe Resources (MRFJ.J) and Xstrata XTA.L, which agreed to idle five of its 20 furnaces between January and March.

Tata Steel KZN's plant, located at Richards Bay on South Africa's eastern Indian Ocean coast, produces 150,000 tonnes of ferrochrome, a steelmaking ingredient, which is exported to customers in Asia, Europe and the United States.

South Africa has been struggling to meet demand for power, especially as new power plants meant to plug the shortfall have been delayed.

Supply will remain vulnerable until the first units of Eskom's new stations become operational later this year.

The national grid nearly collapsed four years ago, forcing mines and smelters to shut for days and costing Africa's top economy billions of dollars in lost output.

(Reporting by Agnieszka Flak in Johannesburg and Harpreet Bhal in London; editing by James Jukwey)

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