Caveats colour Highveld plan
EVRAZ Highveld Steel and Vanadium applied for business rescue last year, and has so far been unable to find a suitor.
However, in a new plan proposed by the Industrial Development Corporation and ArcelorMittal South Africa, Highveld’s heavy steel mill may be run by Amsa for a year with an option for the IDC and Amsa to acquire it at the end of that period.
Highveld CEO Johan Burger said that, from the perspective of smaller, independent steel companies such as Scaw, Davsteel and Cisco (which has since been shut down) Amsa’s cost-plus-3% agreement represented an unusual raw material input cost advantage that was hard to swallow.
“That put lots of strain on local competitors . . . the government should have tried to equalise it.
“Since then prices have come down so we’ve gone full circle. Right now others that produce steel from scrap have an advantage. Depending on where you are in the commodity cycle, these arrangements that are not linked to the free-market cycle could exacerbate situations.”
Despite their struggles with input costs, Burger said, many steel players in South Africa had continued to invest through the upper part of the cycle. Multinational Evraz, the majority shareholder in Highveld, had, however, neglected to do so.
“Now, the fact is that as a result of the worldwide steel crunch it becomes difficult for companies to invest. The impression I get is that Highveld, which I joined relatively recently, didn’t invest for the last decade or so. The reasons for that I don’t know. In this game if you don’t invest to remain competitive, it’s a matter of time before you run into trouble.”
He said the Department of Trade and Industry was giving the secondary players downstream from Amsa and Highveld adequate consideration and protection, and that the department appreciated how being beholden to exports would jeopardise secondary producers should primary
Right now others that produce steel from scrap have an advantage
steelmakers fail.
“We know of over 100 incentives given to Chinese producers by their government. If we don’t do something now to protect the primary industry then we are exposed as a country.”
Regarding the possible deal with Amsa and the IDC, Burger said the Competition Commission would have the final say.
“It’s far from a done deal.” —