STEEL AND FUEL GES

Finweek English Edition - - Cover -

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 SURGES

Source: SA Iron & Steel In­sti­tute

De­mand has ex­ceeded ex­pec­ta­tions. Pi­eter Di­eterich Colin McClel­land

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