SA’s steel sec­tor and the strug­gle for sur­vival It was an un­think­able ques­tion just a few years ago, but many are now ask­ing: can SA’s steel and en­gi­neer­ing sec­tor sur­vive, or will it join TV man­u­fac­tur­ing as a mu­seum piece in the in­dus­trial his­tory of th

Finweek English Edition - - ON THE MONEY -

do­mes­tic steel pro­duc­tion dropped 3% in 2015, the third suc­ces­sive year of de­cline. The sec­tor lost an­other 11 100 jobs and many pro­duc­ers are burn­ing re­serves as they clock up losses. SA’s steel plants are run­ning at 75% ca­pac­ity, well be­low the 85% bench­mark re­quired for a healthy in­dus­try. If this con­tin­ues, more jobs will be shed, says Henk Lan­gen­hoven, chief econ­o­mist for the Steel En­gi­neer­ing In­dus­tries Fed­er­a­tion of South­ern Africa (Seifsa).

A new re­port from Seifsa called State of the Steel & En­gi­neer­ing Sec­tor: 2016-17 paints a sad pic­ture of a sec­tor in de­cline. A global steel glut has low­ered prices and slaugh­tered mar­gins, prompt­ing the depart­ment of trade and in­dus­try to hike tar­iffs to 10% for a wide range of im­ported steel prod­ucts. Steel im­ports in 2015 to­talled an es­ti­mated R376bn, up from R338bn in 2014. This rep­re­sents an im­port pen­e­tra­tion ra­tio of 53%, up from 46% in 2014. How­ever, when the rand de­pre­ci­a­tion is dis­counted (higher im­port prices), then im­ports ac­tu­ally fell (in vol­ume terms) by nearly 12%, ac­cord­ing to the Seifsa re­port.

“The fact is that the com­mod­ity su­per cy­cle came to an end in 2011 and the down phase has been in progress since. All in­di­ca­tions are that at least an­other five years of sub­dued growth can be ex­pected, re­sult­ing in min­ing in­vest­ment de­ci­sions on ex­pan­sions and ex­plo­ration be­ing dras­ti­cally cur­tailed,” says Lan­gen­hoven.

SA pro­duces 7.2m tons of crude steel a year, a mere blip on the global radar. Global steel ca­pac­ity at the end of 2015 was about 2.6bn tons a year, with sur­plus ca­pac­ity cur­rently sit­ting at 0.6bn tons, ac­cord­ing to the Seifsa re­port. The re­sult is a glut of cheap steel on the world mar­ket,

Medupi Power Sta­tion

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