With global stainless steel production expected to grow by 7% this year, steelmaker Columbus Stainless CEO David Martin says the South African market will aim to match this growth.
However, the Southern Africa Stainless Steel Development Association (Sassda) reports that, despite the forecast that 2011 will see improved stainless steel production, global overcapacity in production plants remains a challenge, especially in Europe where major players overestimated stainless steel growth.
Currently, overcapacity in Europe is at between 10% and 25%, while China’s burgeoning stainless steel industry continues to grow.
“As a result, analysts have speculated that a likely alternative to mothballing plants is consolidating the sector,” says Sassda.
Meanwhile, South Africa produced about 460 000 t of stainless steel last year, which accounts for about 1,6% of the 32,2-million tons of stainless steel produced globally.
South African stainless steel apparent consumption experienced a 40% increase in 2010, increasing to 177 242 t from 126 729 t in 2009. This is only marginally down from the 2007 record high of 197 070 t.
Primary local supply improved by 33% to 122 231 t, compared with 2009, while primary imports increased by 65% to 41 870 t. This resulted in a total increase of 40% in local conversion to 164 101 t, while finished product imports increased by 35% to 13 141 t.
The 65% increase in primary imports is due to a significant 132% increase in wire products to 6 854 t, a 83% increase of flat products to 10 223 t, a 51% increase in ingot and billet to 338 t and a 25% increase in tubular products to 8 373 t.
Martin explains that about 12% of South Africa’s total stainless steel consumption is imported, providing the local market with healthy competition.
“Customers are able to buy competitively priced imported material, but supply from overseas mills is not always reliable when the market picks up abroad. However, in the long run, the local stainless steel industry offers the domestic market reliable and flexible delivery, as well as technical support,” he says.
Meanwhile, with the global automotive industry, South Africa’s main stainless steel consumer, back to prerecession consumption levels, the outlook for the country’s stainless steel industry looks promising, despite global uncertainty, says Martin.
“With primary local supply to the automotive industry increasing by almost 60% last year, compared with 2009, the industry remains the top consumer of South African stainless steel,” says Sassda.
In 2009, primary local supply to the automotive industry was about 37 000 t and this increased significantly to about 60 000 t.
South Africa produces about 80% of the European automotive market’s catalytic converters.
Martin explains that, while the production of small car components for the European automotive market has been the main consumer of locally produced stainless steel, mining and energy projects, both locally and in neighbouring African countries, have also contributed to revitalising the industry since the global economic downturn.
Energy projects have mainly involved maintenance, while mining projects have included expansion and maintenance work. With the high price of copper, China Nonferrous Metal Mining’s Chambishi mine, in Zambia, and commodities producer Glencore subsidiary Katanga Mining’s Mumi copper/ cobalt project, in the Democratic Republic of Congo, are currently offering the biggest opportunities.
Stainless steel has also become a popular material in the construction industry, in terms of fittings and handrails, as it offers low mainte- nance and is aesthetically pleasing and durable.
Martin says demand for stainless steel in construction has remained consistent when compared with activity associated with the construction of the 2010 FIFA World Cup stadiums, as the industry services projects such as the Gautrain rapid rail link.
“Although the volume of stainless steel consumed by the construction industry is low, the value and square metreage are high,” he adds.
Martin says the export volumes of stainless steel are similar to last year’s levels, but the world economies are still fragile and the rand is strong, which makes the local industry less globally competitive.
“Exports have decreased in the second quarter as the northern hemisphere enters a holiday season, while exports are expected to increase in the third quarter,” he notes.
The European Union continues to consume the bulk of South Africa’s stainless steel exports. Martin attributes this to Spanish stainless steel maker Acerinox, which has a 76% share in Columbus, using its South African investment to follow its market share in Europe.
However, Martin says Columbus remains active throughout the world and notes increased demand for the steel mill’s 3CR12 stainless steel this year from the US, which uses the product in manufacturing rail cars, buses and fire engines.
The 3CR12 chromium-containing corrosion-resistant steel was developed as an alternative construction material for applications for which the mechanical properties, corrosion-resistance and fabrication requirements of other materials, such as mild steel, galvanised or aluminised steel, aluminium or prepainted steels, are unsuitable.
Factors influencing stainless steel production include the price of nickel, as it is a major ingredient of the austenitic stainless steel family (300 series).
Various grades of stainless steel have been developed as a result of high nickel prices, producing new products that contain less nickel, but have similar properties to high-nickel-containing stainless steel and can be used in some replacement applications.
Sassda states that the cost of nickel increased to just under $29 320/t in February, owing to strong Chinese demand, muted recovery in Western economies and the shutdown of a key Canadian smelter.
However, the price of nickel dropped to $26 332/t in April, below the $27 090/t recorded in April last year.
Stainless steel and special steel consulting firm Steel & Metals Market Research says 57,5% of global stainless steel production in 2010 consisted of nickel-rich 300 series stainless steels.
While the high nickel price has reduced Japanese demand for stainless steel, other role-players have opted to buy scrap for recycling instead of producing stainless steel from ferrochrome, nickel and other raw materials, reports metals information provider Platts.