Jul 13, 2012
Steel supplier implements cost-effectiveness initiatives, mitigates lossesBack
Cogeneration|Eskom|Evraz Highveld Steel|Hatch|Witbank|China|South Africa|Cogeneration|Disciplinary Professional Services|Electricity Intensity|Energy|Energy Consumption|Off-gas Energy|Reduction Technology|Steel|Steel Facility|Steel Giant Faces Additional Challenges|Steel Producer|Steel-making Costs|Steel-making Process|Vanadium Supplier|Cogeneration|Franz Holy|Mike Garcia|Existing Technology|Reduction Technology
© Reuse this
South Africa’s second-largest steel producer will go ahead with its plans to install the plant at its eMalahleni (previously Witbank) steel facility, in Mpumalanga, after an initial environmental-impact assessment, which is currently under way.
CEO Mike Garcia says the assessment results are likely to be announced in the first half of 2013. The company hopes to reach financial closure of the project at that time. This will be followed by con- struction, which should take about two years to complete, and lead up to the final commissioning phase in 2015.
If all goes as planned, the cogenera- tion plant will ultimately convert off-gas energy, produced at the company’s iron plant, into electrical power through steam generation.
While continuing with its plans for cogeneration, the steel producer is also implementing new reduction technology at its iron plant. Reduction technology is used to reduce iron-ore to metal content before it is placed in furnaces to make iron. “This consumes a lot of energy and it’s this point in the process where a lot of off-gases are produced,” says Garcia.
He adds that changing the reduction process will affect the amount of off- gases produced, which will impact on the progression of the cogeneration plant. Unless the company knows exactly what it is going to do in terms of the new reduction technology, it cannot properly design the cogeneration process.
“Ensuring that we understand the interdependencies and the timing of that decision has probably been the biggest challenge for us. This is why we haven’t accelerated implementation of the cogeneration plant as fast as we would have liked to, because we’ve had to wait for the determination of the new reduction technology,” he explains.
The new reduction technology involves a more efficient reduction of iron-ore, which will reduce the company’s energy consumption and improve its overall process efficiency.
Garcia stresses the necessity of reviewing this technology and notes that the existing technology has not changed in any substantial way since it was com- missioned more than 40 years ago.
“We now have the opportunity to work with our technology partner, multi- disciplinary professional services firm Hatch, to review the technologies that are available and have continued to undergo refinement over the last 40 years, and update [our own] technology,” he says.
Garcia believes that, the cogeneration plant and, the new reduction technology will significantly reduce the electricity intensity of the company’s steel-making process.
He adds that, as a result, the company’s steel-making costs will be significantly lower, owing to the fact that energy is one of the primary drivers in the steel- making process.
For instance, the company continues to pursue efficiency gains in the mills from multiple projects that are designed to increase the availability of production assets and increase metallic yield through the process, he says.
“But those are not large one-off projects,” he explains. “Those objectives are being pursued through multiple small projects and continuous improvement, as well as working with our workforce to operate more efficiently and in a more standardised way.”
Garcia adds that all the projects serve the purpose of moving the company down the cost curve, increasing its competitiveness and making it more sustainable in the South African steel market.
Meanwhile, Evraz Highveld also signed a power buy-back deal with State-owned power utility Eskom, in terms of which it agreed to curtail its electri- city demand when necessary, and to make a portion of that demand available to the utility.
In exchange, Eskom offered a monetary amount that would contribute to offsetting some of the total cost of the steel producer’s electricity use.
“The agreement is permanent, but it can be terminated with one month’s notice,” explains Holy. He adds that, in the winter months, Eskom will not demand as much of an electricity use reduction from Evraz, as all the utility’s power plants will be running.
“We will see from September or October, once [Eskom’s] plants start undergoing maintenance again, if we will continue with the agreement.”
Officially, the agreement enables Eskom to request Evraz Highveld to reduce its consumption by 25% for up to two hours a day if the electricity system is taking strain, Engineering News reported in March.
“[Eskom] has asked us a couple of times to take demand offline, which we did,” says Garcia. He emphasises, however, that the agreement is not a prenegotiated deal during which Evraz Highveld agreed that their demand would be capped at a certain level.
“Basically, we [are] unconstrained until Eskom runs into challenges with overall demand and we are one of the customers that has agreed to take some of our demand off line, where necessary,” he clarifies.
The company did this by reducing the power input at its iron plant’s furnaces. “So, while we did not have to shut down production completely, we did slow it down,” he says.
By curtailing production, the steel- maker produced less iron, which means it was producing fewer tons of steel. While Garcia admits that he would have preferred to make and sell steel, he still feels positive about the agreement, and tells Engineering News that its buy-back deal with Eskom did not significantly affect the company.
“We did not have to shut departments down or send people home. We simply reduced the power input at our furnaces, which slightly reduced throughput,” he says.
He notes that, while every steel industry in the world has its own unique cost challenges, he does not think these challenges compare with the escalating costs in South Africa.
Further, because services and other costs have increased to match the rate of inflation, Garcia says that passing addi- tional costs on to customers in the current market environment is very difficult. “Customers have options, one of which is to buy imported steel. Ultimately, the price is set by this open market in South Africa.
“For a South African steel producer to compete successfully, we have to be very good, very aggressive and very passionate about mitigating these multi- ple cost increases, because steel from China is being imported at a very com- petitive price that we have to match,” he states.
In June, Engineering News reported that Evraz Highveld recorded a loss of R94-million for the first three months of 2012, owing to lower sales volumes, compared with a profit of R21-million for the first quarter of 2011.
It was also reported that the producer was moving forward with a comprehensive cost reduction plan, which included labour restructuring.
Garcia confirms that the company is still focused on its current cost position, and is doing what it can to shed costs internally. “This includes restructuring, evaluating our operations and practices, and restructuring our operations and maintenance structures, as well as our front-office structures.”
He looks forward to the long-term pay out of the strategic projects currently being put in place, including the new reduction technology and the cogenera- tion plant, envisioning a real benefit to the company’s cost position.
Edited by: Chanel de Bruyn© Reuse this Comment Guidelines
Other Carbon Steel News
Specialist foundry Steloy Castings will complete a multimillion dollar order for stanchion support assemblies, this month, which will be sent to a petrochemicals refinery in China. “The order comprised an assembly of castings, the bulk of which consists of tubes,...
Lifting equipment and service company Konecranes Southern Africa (SA) is manufacturing nine overhead cranes, with an estimated value of R8-million, for the steel industry and continues its inspection and service contracts for local and multinational steel...
Engineering components distributor Bearing Man Group (BMG) has recently completed the installation of a new steel cable carrier system, of undisclosed value, at a straightening mill of one of the largest steel producers in Africa. “This project in Newcastle,...
Updated 1 hour 36 minutes ago Telecommunications group Gilat Satcom on Monday said it was set to sponsor the second yearly Great Rift Valley Mining Summit, where it planned to unveil new mining-focused mobile satellite services and technologies. The summit, held from March 13 to 14, in Lusaka,...
Updated 2 hours 31 minutes ago The amount of senior business positions filled by women in South Africa declined by 2%, to 26% this year, while 21% of local businesses had no women in senior management positions, auditing firm Grant Thornton’s 2014 International Business Report’s (IBR’s)...
Recent Research Reports
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
Road and Rail 2013: A review of South Africa's road and rail infrastructure (PDF Report)
Creamer Media’s Road and Rail 2013 Report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Liquid Fuels 2013 (PDF Report)
Creamer Media’s 2013 Liquid Fuels report examines South Africa’s liquid fuels market, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing,...
This Week's Magazine
This month’s report includes details of junior miner Papillon Resources’ mining permit for its flagship Fekola gold project, in Mali; the Waterberg Coal Company’s feasibility on the development of an opencast mine, in Limpopo, to produce ten-million tonnes a...
A structured approach, wherein managers personally engage at each level of the project, is necessary to mitigate delays to the workflow on mega construction projects, says State-owned Eskom Kusile power station projects GM Abram Masango. The 4 800 MW Kusile power...
Construction of transmission lines to evacuate power from a regional hydroelectric project in East Africa, which was hanging on the balance following the withdrawal of financing by key partners, is now back on track. After six months of uncertainty, the African...
Three Memorandums of Understanding (MoUs) were signed between South African and Malaysian companies at the Malaysian High Commission in Pretoria on Friday. These MoUs are part of the indirect offsets programme South Africa is providing in return for Malaysia’s...
The South African new vehicle market may well dip to 640 000 units in 2014, says Toyota South Africa Motors (TSAM) sales and marketing senior VP Calvyn Hamman. This is the first prediction that anticipates a drop in the market. To date economists and industry bodies...