Saldanha mill: an industrial evolution
Grand plans ground down to limping along on life support
● At first there was talk of a pipeline to carry iron ore concentrate from the Sishen mine in the far Northern Cape all the way to the Atlantic Ocean. This was more than half a century ago and then, just as now, water was a scarce commodity, so sending a slurry of concentrate hundreds of kilometres to a harbour was a pipe dream.
Next came the plan to build an 850km railway line from the rich iron ore deposits — owned at the time by Iscor — to Saldanha Bay on the West Coast. This meant a commitment of hundreds of millions of rands, but it seemed a good bet as Japan’s steel industry was eager to buy SA’s ore.
Iscor was state-owned at the time and not only did it have plants producing steel at Vanderbijlpark, Pretoria and Newcastle, it also had its own collieries and iron ore mines, including Sishen.
By 1970, planning was under way to develop the port at Saldanha for the export of Sishen’s ore and to build the rail link between them. But that was only the start.
“[T]here is nothing imaginary in the possibility of setting up a fourth Iscor at Saldanha, nor of creating a new high-quality steelproducing complex trading on the export markets of the world,” an article in Business Times declared that year.
The port and rail infrastructure were completed that same decade, but a combination of bureaucracy, global economic downturns and international sanctions meant it would take another quarter of a century for Saldanha Steel to be built.
In the end, the Industrial Development Corporation, chaired by retail tycoon Christo Wiese at the time, chipped in. One of the final nods to have the project approved in the mid-1990s came from then trade & industry minister Trevor Manuel.
In 1998, the Saldanha Works produced its first hot-rolled coil of steel. Now, only 22 years later, the mill is being mothballed.
Iscor, long since privatised, is now the local unit of global steel giant ArcelorMittal. Saldanha’s steel plant has lost its competitive advantage and is unlikely to retain it, ArcelorMittal SA’s CEO, Kobus Verster, said this week.
Cheap electricity, relatively low rail charges and abundant in-house supplies of iron ore were all part of that competitive position. And over the years, the plant carved out a niche in hot-rolled coils of about 1.6mm thick.
But the company now has little control over its biggest input costs, having sold the railway line to Transnet’s predecessor in the late 1970s and its iron ore mines to Anglo American’s Kumba Iron Ore. The electricity price hikes of the past decade were more hefty blows, as was the weaker rand, increasing the price of the imported coking coal and steel billets the plant needs.
Add to that a lacklustre market, because after absorbing all the costs, Saldanha, as an export-oriented business, has to find foreign buyers.
“The international steel market is in a particularly bad state,” said Verster. The trade war between the US and China has had a big impact recently.
Started with the aim of exporting 1.25million tons of steel a year, Saldanha had been producing about 1Mt a year more recently. But over the past five or six months, that was cut to 60%-70% of capacity. “That’s roughly the lowest you can operate at,” said Verster.
ArcelorMittal SA is in the midst of a review of all its assets. Battle-bruised after years of losses, it is also struggling to compete in the domestic market against cheap imports from China. Though local industry has received some relief in the form of import tariffs in recent years, it has not been enough to stave off the inevitable.
ArcelorMittal SA has just finished consultations with 2,000 workers in terms of section 189 of the Labour Relations Act and now will begin that process with Saldanha Steel’s 900 workers, of whom 550 are full-time employees.
The move is of great concern to trade union Solidarity. The Saldanha plant is the area’s largest employer and the real impact on the Saldanha community and the Western Cape will be huge, with thousands more negatively affected by the closure, said Willie Venter, Solidarity’s deputy general secretary for the metal & engineering industry.
The steelmaker has its critics. The protection of ArcelorMittal SA has been slowly squeezing the life out of downstream manufacturing, said National Employers’ Association of SA CEO Gerhard Papenfus.
“Although it is unfortunate that it has come to this, the reality is that, in respect of protectionist duties on steel imports, government will have to choose between the protection of an unprofitable, struggling ArcelorMittal SA, employing 9,000 employees, or breaking the stranglehold that these duties have on the steel downstream [in sectors] employing in excess of 500,000.”
According to Verster, the company will wind the Saldanha operation down in an orderly fashion, retaining critical spares.
“We won’t just abandon the place ... We will keep the plant in such a condition that you can restart it,” he said.
But ArcelorMittal SA has not had any approaches from interested buyers.
“The plant was running very efficiently, so it is doubtful that somebody else … can be more successful,” said Verster.