Local industry to benefit from decline in demand for Chinese imports

1st March 2013

By: Sashnee Moodley

Senior Deputy Editor Polity and Multimedia

  

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Adecrease in steel exports from China will increase African countries’ demand for South African steel, says JSE-listed steel processor and supplier BSi Steel trading exports and roofing chief executive director Craig Parry.

He explains that African steel markets are becoming increasingly aware of the importance of acquiring high-quality steel to meet project requirements and that the specification by African markets of high-grade steel is a great opportunity for South African steel producers and traders.

“The markets in Africa are slowly becoming sophisticated in terms of understanding the importance of good-quality steel, rather than preferring to buy cheaper products imported from China,” Parry says.

He also highlights that South Africa is conveniently situated to supply the African steel markets, compared with China, and, with the rising wealth of African countries, a continuous supply of steel is ideal to meet the growing demand for infrastructure development.

Further, the quality of steel and the delivery times are taken into account by buyers and engineers who are concerned with making project deadlines efficiently and on time.

Parry adds that professional expatriates, mainly sourced from South Africa, influence local steel exports to neighbouring countries, as they are familiar with the country’s products.

He notes that a strong reputation and a proven record are great advantages for local steel companies supplying African markets.

“Supplier reliability and a ‘can do’ attitude are significantly important for operational teams and manufacturing industries.”

Efficient transport systems and reliable supply to African regions also offer South Africa a competitive advantage, Parry says.

However, he notes that South Africa is under the influence of and under threat from China, which has always viewed Africa as a vast deposit of mineral wealth and dense consumer markets.

Parry explains that this is reflected in the figures from the first Forum on China-Africa Cooperation, which was held in Beijing, in October 2000, at which African and Chinese leaders pledged to ensure the development of a new, stable and long-term partnership that would boost the growth of both economies.

Since then, figures from independent provider of proprietary data Business Monitor International show that trade between China and African countries has increased from 4.7% to 13.5% of Africa’s total trade.

Nevertheless, Parry says China is expected to become a domestic-based economy and this will depress the African export demand as the goods and steel will be sold in the Chinese domes- tic market, therefore reducing the quality available for export to African markets. Importing cheap, finished steel goods is a threat to South Africa and, for this reason, he hopes that the decrease in imports will also include finished steel products.

The South African steel market is depressed as a result of the global recession, which started in 2008, political uncertainty and ever-rising utilities costs, subduing local economic growth, Parry states.

He says, while these challenges are expected to be dealt with in the coming years, the recent controversy surrounding platinum producer Lonmin’s Marikana mine, in the North West, has done little to enhance South Africa’s image as an investment destination locally and internationally.

“The South African steel market will remain depressed for the foreseeable future. However, we have seen an uptake in demand in the last few months and this is largely owing to a restocking strategy and not an apparent increase in steel consumption in the manufacturing sector. There is hope that there may be an injection of fabled government spend and we forecast a real growth of 3.8% in 2013 because of this,” says Parry.

However, he notes that steel-supply opportu- nities in sub-Saharan Africa are increasing as a result of these countries having to invest heavily in the development of infrastructure.

Oil and gas pipelines, structural steel, graded abrasive plates and heavy plates for mining, among others, have gained popularity in the region.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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