STEEL AND FUEL GES
STEEL DEMAND has also soared, resulting in increased imports, as projects such as the Gautrain and Eskom’s new power stations have kicked in. Pieter Dieterich, of the SA Iron and Steel Institute, says: “Demand for primary steel products has exceeded the expectations of primary steel producers. And that’s before the public sector’s infrastructure spending programme has really kicked in. I don’t believe we’ve really seen the start of it yet.”
Dieterich says steel imports, which have always been part of the mix, have increased and will continue to do so. He says carbon steel producers are adjusting the ratio of their exports to domestic sales. Whereas previously exports made up about 50% of their out- put, that’s being reduced to 25%. “There’s a move by the primary steel exporters to service the SA market.”
SA is also facing a shortage of fuel, which will push up imports of refined petroleum products. Colin McClelland, a consultant to the SA Petroleum Industry Association, says the shortfall is a function of the economy growing faster than expected. He says imports mean there aren’t physical shortfalls. Rather, the problem is that there isn’t enough pipeline capacity to move fuel from the coast inland. To transport fuel inland a large number of trucks are needed.
McClelland says fuel companies don’t expand refineries until it’s clear they will be heavily utilised.
“It’s normal to go through a period of imports. If the econo-mics of building a refinery make sense, the companies will do so. I expect that to happen about five to seven years from now.”
Meanwhile, all the growth in the fuel market will be imported. As the market is about 24bn litres strong – and growth in the market expected at around 4% to 5% – SA will have to import more than 1bn litres.
McClelland cautions against assuming that SA’s balance of payments will deteriorate significantly due to the imports of refined products. Some economists have been concerned that this will be the case. However, McClelland says the increased imports of refined products should be set against the fact that growth in crude oil imports will be less.
STEEL EXPORTS FALL AS LOCAL DEMAND SURGESSource: SA Iron & Steel Institute
Demand has exceeded expectations. Pieter Dieterich Colin McClelland