Steel mill project, South Africa

24th October 2014

By: Sheila Barradas

Creamer Media Research Coordinator & Senior Deputy Editor

  

Font size: - +

Name and Location
Steel mill project, Limpopo, South Africa.

Client
Industrial Development Corporation (IDC) and Hebei Iron & Steel Group have signed a memorandum of understanding (MoU) outlining the Chinese steel group’s intention to take a 51% stake in the steel mill.

Project Description
The proposed steel mill will initially aim to produce three-million tons a year, with the expectation that the plant will produce five-million tons of mostly construction steel by 2019.

The mill will draw its iron-ore resources from the magnetite tailings in the Phalaborwa area.

Value
$4.5-billion. The first phase will cost an estimated $2.8-billion. The second phase will cost $1.7-billion.

Duration
Construction on the project is scheduled to start in 2015.

Phase 1 is expected to be completed by 2017, while the second phase will be introduced by 2020.

Latest Developments
The detailed feasibility study on a two-phase steel project, planned for development by Hebei Iron & Steel Group, of China, and South Africa’s IDC should be completed in the first quarter of 2015, IDC CEO Geoffrey Qhena has indicated.

Mining and Manufacturing divisional executive Abel Malinga has said that the initial phase will produce flat and long products similar to those currently available on the local market. However, the intention during the second phase is to produce steel products and grades not currently manufactured domestically.

Qhena has also stressed that the output will not be destined exclusively for the domestic market, where there is prevailing excess capacity.

Therefore, the mill will also target regional markets.

He acknowledges that the project could not be justified only on South Africa’s steel demand. However, the IDC is convinced that South Africa’s infrastructure plans, together with rising demand in the rest of the Southern African region, are sufficient to provide a commercial case for the investment.

Malinga estimates that the yearly demand for steel in sub-Saharan Africa will rise to 31-million tons by 2020.
Qhena notes that the IDC does not want to build the plant “too late” to capture a share of that market, adding that the project should also add competitive pressures domestically, where government believes steel prices remain too high to support downstream investment.

The IDC is also relatively sanguine about the facility’s access to electricity, with Malinga stressing that energy efficiency and cogeneration are being integrated into the mill’s design.

In September, Hebei and the IDC signed an MoU, outlining the Chinese steel group’s intention to take a 51% stake in the mill, for which construction was scheduled to begin in 2015.

It is expected that the plant will also be partly financed by the China-Africa Development Fund.

Hebei owns iron-ore and copper mining assets in South Africa, having participated in a consortium established to buy Rio Tinto’s 57.7% interest in Palabora Mining Company for $373-million.

The IDC, which is also part of that consortium, is keen to add value to the large stockpile of iron-bearing magnetite material on surface alongside the mine.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
Not stated.

Contact Details for Project Information
IDC, tel +27 11 269 3000 or fax +27 11 269 3116.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION