Amid perceptions of steel glut, AMSA confirms long-steel shortages

12th April 2016

By: Terence Creamer

Creamer Media Editor

  

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Steel producer ArcelorMittal South Africa (AMSA) has place allocation restrictions on domestic consumers of rebar and wire rod, owing to a combination of weak domestic orders at the end of 2015, supply disruptions and an unexpected surge in restocking-related domestic orders since the start of the year.

Acting CEO Dean Subramanian told Engineering News Online on Tuesday that the group expected the backlog to persist until June for rebar and until mid-July for wire rod.

He insisted, however, that there was “absolutely no link” between the allocation restrictions and the introduction of 10% duty protection for the two products in question.

In addition, he said the three price increases announced on long-steel products since the beginning of 2016 bore no relation to the increase in protection levels. Price rises had, instead, been precipitated by currency fluctuations, an increase in iron-ore and coal prices and a recovery in international steel prices, which  still remain below the January 2015 price on rebar of $367/t (free on board China).

Some customers had been taken aback by the notice of supply limitations, particularly in light of the perception of a global steel glut. One AMSA customer who spoke to Engineering News Online on condition of anonymity said the rebar restriction would probably result in it having to forfeit a recent African order, which would now probably be supplied out of North America.

Subramanian said it had played open cards with its long-steel customers regarding its current supply constraints, which were restricted to the long-steel environment.

He indicated that there had been some operational difficulties at AMSA’s Newcastle mill, as well as at other domestic mills, but indicated that the backlog had arisen primarily as a result of weak domestic orders in the fourth quarter of 2015, which had forced AMSA to allocate product to export markets.

There had since been a strong recovery in domestic orders, driven primarily by restocking activity.

AMSA had halted all rebar and wire rod exports from the start of the second quarter and had also ramped up production at Newcastle to 4 750 t a day in an effort to deal with the backlog that had arisen.

It was also shifting 10 000 t of slab from its Vanderbijlpark operation, in Gauteng, to Newcastle, which would be converted to billet. In addition, it had  sourced a further 5 000 t from an external local source  over the coming three months.

“Even though the above initiatives have resulted in further costs to AMSA it reflects the current commitment to serve the domestic market,” Subramanian said.

Scaw Metals CEO Markus Hannemann confirmed the order and told Engineering News Online that it would seek to release capacity to supply Newcastle. However, he stressed that the company was facing a major problem of scrap availability, which was limiting its ability to produce.

Subramanian indicated that AMSA was assessing other ways to increase Newcastle’s output, possibly up to 5 000 t a day. However, he indicated it was also encouraging customers to offer it better visibility of their anticipated future demand so that supplies could be stabilised and backlogs avoided.

“If customers place long-term orders with the mill we will be able to plan better. But if customers trade in the spot market the focus becomes far more short-term and we have to find export outlets for the steel so that we can run the mill at sustainable levels.”

He also indicated that AMSA had no intention of reversing its decision to seek safeguard protection on several flat- and long-steel products over-and-above the 10% duties that had already been introduced on a range of steel grades.

Import levels remained high, with some 103 000 t of foreign steel having landed in South Africa during February alone, the bulk of which came in the form of hot-rolled coil.

The International Trade Administration of South Africa (Itac) and the South African government were pursuing consultations with downstream steel consumers to assess the impact of even higher protection on primary steel.

It was reported recently that Itac would make a determination in June.

Edited by Creamer Media Reporter

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