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SA furnaces stoked to meet global chall... Major projects key to prosperit... Stalcor has the muscle for big push in ... Iscor fires first shots in battle to cut... Saldanha is ready to roll after rehearsa... Columbus shows the way to new market... Illegal imports stunt local growt... A driving force for revival of SA's ind... |
SA furnaces stoked to meet global challenge
Steel in its various forms is a major contributor to South Africa's gross domestic product and one of the mainstays of the manufacturing sector. DAVID JACKSON looks at the future of the industryDRIVEN by the need to become globally competitive in a depressed international market which is aggravated by economic turmoil in Asia and a domestic slowdown at home, the SA steel industry faces a period of change going into the new millennium.
The global steel industry has been severely affected by the Asian currency crisis. Reduced growth in the region as a result of the acceptance of IMF aid packages has led to a sharp decline in demand.
Total consumption in the Asian markets (including China) represents approximately 42% of total world consumption.
Iscor Steel MD Louis van Niekerk says that although Asia will remain an importer of steel in the short term, it will be at a reduced rate. He points out that certain Asian countries which used to be net importers have become net exporters.
This crisis has had a negative impact on dollar selling prices to Asian countries. Prices in Europe have held relatively firm, but are now starting to come under pressure as more steel exports find their way into the European market.
At home, the cyclical downswing in the SA economy, which became apparent in the second half of 1996, has been intensified owing to sustained high levels of real interest rates, record levels of personal debt, low commodity prices, reduced growth in exports from the manufacturing sector as a result of the Asian crisis, and the recent speculative onslaught on the rand.
The cyclical decline has been mirrored by a drop in domestic steel demand as activities in steel-consuming industries continued to slow under the weight of high interest rates, observes Van Niekerk.
The domestic steel industry was further affected during the past six months by strong pressure from cheap imports of both primary and secondary steel products from Asia and former Soviet Union countries.
As a result of increasing imports from Russia and Ukraine, Iscor, together with the SA steel industry, filed an anti-dumping case against these two countries in February, calling for an import duty of 80% on all hot rolled plate and sheet products.
The Southern African Stainless Steel Development Association (SASSDA) has also obtained interim antidumping measures against China, South Korea and Taiwan.
Van Niekerk says domestic demand for steel is expected to remain under pressure over the next 12 months on the back of the expected continuation of weak economic conditions and high interest rates. The weaker rand is expected to protect the domestic market somewhat against imports, while anti-dumping measures should come into effect shortly.
The Asian crisis is likely to continue having a negative influence on world steel markets for the next 12 months, adds Van Niekerk. The Far Eastern markets, in particular, will be affected. Economic growth in the US and Western Europe is expected to continue during the next 12 months, albeit at a lower rate.
Iscor Steel is meeting the challenge by embarking on an extensive re-engineering process.
"It is vital for the SA steel industry to become globally competitive," says Van Niekerk. "As a primary steel producer, Iscor holds the key to the long-term survival of certain steel-related industries. It is critical that Iscor's cost of production and service levels become globally competitive. If we cannot achieve this, it will be fatal for the SA steel industry."
Bright spots on the SA steel industry horizon, say analysts, include the imminent coming on stream of the Saldanha Steel project, the improved performance of Columbus Stainless and the substantial growth in stainless steel exports.
While export volumes of stainless steel have grown at 25% a year since 1991, SA accounts for just over 2% of world supply. SA's emergence as a global stainless steel producer is part of a broader strategy aimed at weaning the country off primary commodity production. The theory is that resource-rich countries such as SA are prone to volatile commodity markets.
Also known as Dutch disease, this primary commodity dependency traps resource-rich countries at the bottom of the value-added chain, leaving it to more developed countries to turn raw materials into something more valuable. The commissioning of the Columbus plant was seen as a small but vital step in moving SA up the value-added chain.
There is a vibrant secondary industry in stainless steel, turning primary product into autocatalytic converters, tank containers, cutlery, catering equipment, tubes, sanitary ware and precision equipment. Stainless steel production, both primary and secondary, is worth about R6.2-billion a year. The domestic market consumes some 71 000 tons of local stainless steel production a year, augmented by 18 000 tons from foreign suppliers.
Most domestic demand is from manufacturers of autocatalytic converters; tank container producers; tube, pipe and fitting makers; vessel and process flow equipment factories; and the structural metal industry.
Most of these locally manufactured products are sold abroad and catalytic converters and stainless steel containers account for the bulk of stainless steel product exports.
The Department of Trade and Industry is establishing several industry clusters, steel included, aimed at improving the country's industrial competitiveness.
The IDC-managed stainless steel cluster study has identified five industry sectors, or microclusters, for analysis and a local and international benchmarking exercise for each of these has been completed. The microclusters focus on hollowware, cutlery, sanitaryware, tube and pipe and bulk transportation.
SASSDA has scheduled a workshop at the end of September which will formulate a plan to assist the local stainless steel industry to compete in all sectors of world markets.
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