Rehabilitation work begins to prepare Highveld structural mill for restart

23rd January 2017

By: Terence Creamer

Creamer Media Editor

     

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Rehabilitation work at Highveld Steel’s heavy structural mill, located at the mothballed steel plant’s expansive site in Mpumalanga, is under way to prepare the facility for recommissioning, following the conclusion of a supply and marketing deal with ArcelorMittal South Africa (AMSA) in December.

Under the proposed arrangement, AMSA will supply blooms and slabs, primarily from Newcastle and Vanderbijlpark, for processing into heavy structural products used in the construction and infrastructure markets. The products to be manufactured include rail sleepers and bars, beams and columns and bearing piles.

A small crew of contractors, mostly former Highveld employees, are currently on site to prepare the mill, which was built in the 1960s, to produce at rates and qualities that are as close as possible to the mill’s original design specifications and tolerances. On receiving the blooms and slabs from AMSA, initially by road, the inputs will be reheated and, where necessary, cut prior to rolling.

AMSA will be responsible for sales and marketing, and CEO Wim de Klerk indicates that resumption of production is dependent on the implementation of the 10% bound rate import duty on the products to be manufactured at the eMalahleni facility.

The International Trade Administration Commission of South Africa (Itac) has already approved 10% base protection for the products in question, but has refrained from implementing the duties, owing to the absence of a domestic manufacturer.

Itac tells Engineering News Online that the duty will be deferred until such time that manufacturing of structural steel resumes in the Southern African Customs Union region. “Once manufacturing resumes the commission will convey its recommendation to the Minister on the implementation of the duty on structural steel.”

Highveld CEO Johan Burger says, that in addition to the implementation of duties, the timing of resumption of production is also dependent on domestic market conditions, as well as the import cycles of buyers of structural steel. Therefore, parallel efforts are also under way to communicate with domestic buyers so as to align the mill’s start-up with their import cycles. Merchants typically place import orders at least three-months ahead of delivery.

For this reason, neither Highveld nor AMSA are willing to be drawn on firm timeframes, saying only that “details regarding implementation are being finalised and it is envisaged that the heavy sections mill will begin operations in 2017”.

Burger says it is also premature to state for certain how many permanent jobs will be created from the reopening of the mill. Apart from uncertainties relating to volumes and protection, Highveld also needs to finalise its operating model, which will be key to determining the number of jobs that will be created.

He expects, however, that hundreds of employment opportunities should arise and confirms that former employees will be given preference.

When production was halted in 2015, more than 1 700 people were employed across Highveld, but many of these individuals were involved in operations outside of the structural mill. All employees were retrenched after a transaction to sell the business as a going concern to International Resources Limited, of China, collapsed in early 2016.

The business rescue practitioners have subsequently been mandated by creditors to pursue a wind-down plan, which includes possibilities for the sale of assets as going concerns, the resumption of some productive assets and the scrapping and disposal of non-strategic assets.

Besides efforts to restart the structural mill various other initiatives are also being pursued in an effort to realise value for former employees and creditors.

Some facilities on the Highveld site are already being rented to various businesses, while some waste dumps are also being reprocessed. There could even be potential to revive the site as an industrial zone, with Burger noting that the facility has well established infrastructure, as well as good access to utilities such as water, electricity, gas and rail.

The rail infrastructure at Highveld has already attracted significant interest, particularly from coal miners, which believe there is potential to create an inland logistics hub for miners seeking a way to utilise rail, instead of road, to transport coal to either Eskom power stations, or to the Richards Bay Coal Terminal.

“Long-term sustainability for the sector means ensuring the continued supply of product to our customers and the downstream industry, job preservation and strengthening the local industry. We are confident that, with this agreement, we are able to achieve all three,” De Klerk concludes.

Edited by Creamer Media Reporter

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