Despite the decrease in demand in the local steel industry, the industry remains invaluable to South Africa’s economy, says local provider of high-quality global electrical, automation, mechanical, consumable and capital equipment products, Elquip Solutions MD Mike Cronin.
He explains that steel is a commodity that can be used in a range of applications, from the automotive sector to structural. The slump in the South African economy has resulted in other industries also being negatively affected, but the steel industry provides a large portion of employment, making its current declining status a concern for the economy.
Therefore, Cronin emphasises that “the value of steel in this country is crucial. It is important that the industry is buoyant and working as it should”.
Government imposed a 10% import tariff on certain steel products last year. This safeguard will provide emergency protection from imports, most notably from East Asia, if the domestic steel industry is threatened. In addition, a 12% safeguard duty on hot-rolled coil (HRC), in addition to the existing 10% import tariff, is in the process of being authorised by the World Trade Organisation, raising overall protection for HRC to 22% for a three-year period.
However, experts and businesses in the steel industry are questioning the efficiency of these tariffs, saying that government must take leadership in its decision to impose tariffs.
Cronin believes that the policy is insufficient, as importing steel is still more cost-effective at this point.
“Availability in the steel industry is essential, and China now has excess capacity in production, and is searching for countries in which to sell its excess product. If South Africa’s key local steel supplier can no longer supply the industry with certain steel products, there is no local alternative source.”
Labour vs Automation
Steel industry labour costs in South Africa are exorbitant, and Elquip’s customers are looking for technologies to produce their product in a more cost-effective, efficient and reliable way to combat their high costs of labour. Advances in the steel industry are necessary to minimise production costs, says Cronin, which is why automation in the steel industry will be a great benefit.
“Automation means more efficient and effective production. Automation adds concern in the current climate in South Africa, as it may potentially cost many jobs. Some can, however, be upskilled or redeployed. Nonetheless, in a country such as South Africa where labour is a constant, expensive challenge, companies may need to take more time to adapt to changing industry technologies.”
He suggests that the change from manual to automated production must be embraced if South Africa is to compete in a global market.
Imported products manufactured in Europe are more cost-effective to buy than South Africa producing the product, owing to the efficient methods used to manufacture the products by minimising costs, explains Cronin. For example, an automated machine may require two people to operate, but a production line that uses labour could have up to 40 people working on the same line. The price of the finished product in a manual production line is too costly. In addition, the cost of human error is erased when dealing with automated machines.
Repeatability makes for reliability, states Cronin, and depending on people for production means depending on skills. Unfortunately, South Africa is struggling to keep its skilled workers in the country.
If there are a small number of skilled workers who know how to operate an antiquated machine, the company depends on their ability to complete a product, as well as their unique product knowledge. Should these employees no longer work for the company, the machinery becomes redundant, says Cronin.
However, with automation, he states that this is not the case. It only requires an operator to ensure its smooth running, with the associated knowledge on processes to complete the product contained within the machine. In addition, there is no waste or quality-control issue, he notes.
Moreover, Cronin mentions that, globally, the steel industry is not using as much steel as it should, forcing large corporations to retrench workers and, instead of finding ways to re-employ, they settle for automation.
One way of easing the transition to automation is Elquip Solutions’ retrofitting of old-fashioned machinery, which would be automated instead of becoming obsolete. The machinery is being upgraded and automated without replacing it entirely. Minimising production downtime of companies whose machines are being retrofitted, is ensured by carrying out the upgrades in stages, resulting in greatly increased productivity and profitability when completed.
Cronin remains optimistic that automation will affect the steel industry positively in South Africa, despite the dominant manual labour environment.