While government has increased import tariffs to protect the local steel market from low-cost Chinese imports, steel products manufacturer and supplier LionSteel CFO Pierre Willemse believes that more needs to be done to support the South African steel market.
He says that the state of the steel industry must be one of the most critical governmental issues currently, owing to its connection to job creation in the country. “The industry has the potential to create huge job opportunities – we have iron-ore, now we need to focus on how to beneficiate it and develop the related manufacturing and fabrication industries. Job creation should be the number one priority in South Africa, and the steel industry has the potential to significantly effect this,” he explains.
In response to the challenges the steel industry faces, Willemse says LionSteel is focusing on modelling itself as a project house rather than as a full-time manufacturer, adding that its plants will not be ramped up to full capacity until projects have been secured.
However, he notes that many potential projects in South Africa are stalled because of administrative issues or overly extensive investigation, and recommends that quicker project implementation needs to be a priority. He cites fracking projects in the Karoo – a hotly contested issue because of the environmental issues – as an example.
Willemse points out that, while there is no doubt this should be undertaken in an environmentally conscious manner, environmental concerns must be balanced with the benefits that fracking could provide for the South African economy and the vast job opportunities that could be created. “We must take advantage of the opportunities that are available.”
He acknowledges that there are some opportunities for steel pipe manufacturers in South Africa, for example, in the upgrade of water infrastructure. However, he points out there is a much bigger market in Mozambique, owing to the discovery of massive gas reserves in 2010.
Willemse explains that LionSteel’s key focus at present is the acquisition of projects associated with these gasfields, especially the planned installation of about 2 600 km of pipelines from the north of Mozambique to South Africa by independent African oil and gas company SacOil, and other pipeline installations by integrated energy and chemicals company Sasol.
In line with this, LionSteel acquired steel pipe manufacturing mill Capital Star Steel SA, in Maputo, in May, after lengthy negotiations with steel and concrete products supplier Capital Africa Steel.
“This is one of the biggest and most advanced steel mills in Africa,” says Willemse. The mill was mothballed in January last year, however, he claims that LionSteel believes it is a good investment that will enable the company to take advantage of upcoming projects in Mozambique.
Willemse notes that Capital Star Steel had implemented very successful skills development programmes in the past, with about 400 highly skilled people having been retrenched when the mill was mothballed. However, this will be advantageous when LionSteel acquires projects in Mozambique, as a well-trained workforce will be readily available as operations at the mill pick up again, he points out.
“Although the potential for projects stemming from the discovery of gasfields in Mozambique have been discussed for some time, I believe the implementation of these projects is imminent,” says Willemse.
LionSteel plans to ramp up sections of the plant this year to capitalise on the expected boom in the Mozambican market.