Welcome boost for local steel industry
Dti recommends domestic steel and components be used in the rail permanent way sector
ARCELORMITTAL South Africa (Amsa) has welcomed the latest recommendation by the Department of Trade and Industry (dti) that domestic steel and locally made components be used in the rail permanent way sector.
The designation brings an end to a two-year journey that began when the local steel industry plunged into crisis amid the fall in global demand and the flooding in of cheap Chinese imports.
The minimum threshold for local content in the rail permanent way sector aims to ensure the minimum local content designated was applied to manufacturing activities.
A local content threshold of 100 percent was allocated to designated rails, rail joints, ballasts, railway sweepers, assembly and testing of fully built units among others.
A local content threshold of 70 percent was allocated to railway maintenance of way plant and equipment.
All primary related products, flat products and long products are included in the designation and must be manufactured and sourced locally in a bid to support existing local steel-making capacity.
The designation of steel products could be a lifeline for struggling local steel players, given the government’s multibillion public infrastructure programme.
“This is great news for both primary steel producers and the downstream steel industry as it will drive demand for locally produced steel content and locally manufactured steel products in state-funded rail projects,” said Wim de Klerk, Amsa’s chief executive, yesterday.
Solidarity confirmed yesterday that it had received a section 189A retrenchment notice for Africa’s largest steel supplier, Amsa.
Amsa has been bleeding cash, and numbers in the six months to June 2017 were bleak as operating and headline losses increased by R714 million and R1 161m respectively.
The company blamed the higher coking coal and iron ore costs, the relatively strong rand and US dollar exchange rate, as well as the continued weakening of the South African economy.
It also complained that steel consumption had decreased by 3.8 percent as a result of subdued economic growth.
Amsa announced it would implement cost-saving measures and structural changes that could lead to potential job losses due to the tremendous pressure on the steel industry and the decline in demand for steel.
Last year, the National Treasury said it had a public sector capital expenditure of R865.4 billion over the next three years.
State-owned companies would spend R337bn of that amount; R291.6bn would be spent in the steel-intensive transport and logistics sectors.
The government identified public procurement as one of the levers in the Industrial Policy Action Plan.
The public sector infrastructure expenditure as a share of gross domestic product increased from an average 5 percent between 1998/99 and 2004/05 to an average 6.6 percent between 2005/06 and 2014/15, according to the Treasury.
Since 2011, the Department of Trade and Industry can designate industries, sectors and sub-sectors for local production with minimum local content thresholds.