Africa|Automotive|Building|Cable|Coal|Components|Construction|Engineering|Export|Freight|Iron Ore|Locomotives|Pipes|plates|rail|Repairs|SECURITY|Service|Steel|supply-chain|Transnet|Products
Africa|Automotive|Building|Cable|Coal|Components|Construction|Engineering|Export|Freight|Iron Ore|Locomotives|Pipes|plates|rail|Repairs|SECURITY|Service|Steel|supply-chain|Transnet|Products
africa|automotive|building|cable|coal|components|construction|engineering|export|freight|iron-ore|locomotives|pipes|plates|rail|repairs|security|service|steel|supply chain|transnet|products

AMSA shuts furnace over rail troubles and grapples with pricing impacts of Russia-Ukraine conflict

17th March 2022

By: News24Wire


Font size: - +

Transnet's poor performance has forced ArcelorMittal South Africa (AMSA) to shut off a blast furnace for three weeks while the steelmaker has also warned customers that the Russia-Ukraine conflict is pushing key input prices skyward.

The curveballs come just a month after the group, South Africa's primary steelmaker, posted its highest earnings in nearly 15 years, rebounding from the brink of collapse as steel markets improved and structural reforms began to bear fruit.

In a letter sent to customers earlier this month, which Fin24 has seen, AMSA said it had been experiencing a "progressive deterioration in the availability of trains" which has affected the levels of raw materials stock and has forced the steelmaker to halt production at one of its blast furnaces in Vanderbijlpark.

AMSA requires vast quantities of iron ore, coking coal and other raw materials as key inputs in the steelmaking process.

Traditionally, this has all been delivered by rail, which AMSA's facilities are designed around. But increasingly, in the face of severe operation and security issues experienced by Transnet Freight Rail, these materials have been delivered by truck at great additional expense.

The group has three blast furnaces, two to produce flat steel products in Vanderbijlpark and one in Newcastle for the production of long products, and already began implementing shorter, unplanned stops at all three furnaces in February in response to low stock levels.

These have, however, been deemed unsustainable, prompting management to a longer, controlled, stop at one Vanderbijlpark furnace which began on 3 March and is scheduled to continue until the 23rd.

AMSA said there was enough stock to ensure the stoppage should have no material impact on customers. AMSA also said its Newcastle Blast Furnace is scheduled for an extensive repair, which will begin in the third week of April and stretch into June. Production levels are expected to normalise from around 9 July.

On Wednesday the steelmaker further informed its clients that input costs are changing rapidly in response to the Russia-Ukraine conflict and that some steel prices will respond too.

Already, the steelmaker said the price of long steel products will increase by 13% to R2 000 per metric ton from 1 April. Long products include rods, bars wire, nails, and narrow, seamless pipes.

Both Russia and Ukraine are major global suppliers of various steel input raw materials, semi and finished steel products and recent developments have seen all commodities rise sharply in price, AMSA said in a letter to customers.

"The international raw material basket (iron ore, metallurgical coal, scrap) has increased by about 58% over the last six-month period," the letter said. "Metallurgical coal [for] which South African steel production has to rely largely on imports, had risen by about 300%."

This has pushed international steel prices up but Amsa said it opted not to change its flat steel products effective 1 April. Flat steel products are made from steel slabs and include steel plates, large welded pipes, and structural beams.

However, to allow for more flexibility in the future, the steelmaker said it would issue price increase letters to customers with 14 days' notice, as opposed to its conventional practice of issuing it on the first of every month.

Mike Benfield, CEO of Macsteel - AMSA’s largest customer and the largest steel merchant in SA – said the blast furnace stoppage was not having much impact on the industry. Rather, there is a deluge of supply in the market as demand has dropped off.

"Many players have had probably one of the poorest Februarys ever," he said. "There are a lot of problems out there, there's just no demand at all."

These include the impacts of heavy rain on cash flows in the agricultural sector, a slowdown in the construction and engineering sectors, and continued supply chain disruptions in the automotive industry. 

But overall, with steel production closely correlated to economic growth, "it's just the story [of the] South African economy", said Benfield.

"The building blocks of the economy aren't working. There is very sluggish activity."

Theunis Duvenage, CEO of SS Profiling, a supplier of various steel products such as roof sheeting and coils, agreed there was low demand and a glut of product, but said the rising prices paired with furnace stoppages was cause for concern.

Rising local prices, paired with a 10% customs duty on most imported steel, downstream manufacturers will be rendered uncompetitive and unable to export their products.

"A year or two ago we [had] shortages in the market that caused a huge spike in prices," Duvenage said. "And if you reduce South Africa's output of steel by shutting down one blast furnace - although it's not permanent - you run the risk of creating shortages again."

In a written response to Fin24, Transnet Freight Rail (TFR) said its performance on the Central Corridor had been impacted by unprecedented levels of cable theft and vandalism and the unavailability of locomotives to service crucial flows.

"TFR has experienced a 177% increase in cable theft incidents in the past five years, the resultant tonnage loss is 343% over the same period. The company has experienced over 4 700 security-related incidents across the network year to date, approximately 1 000 of which are from the central corridor alone.

"These incidents cause massive disruption as the central corridor acts as a junction for most of the corridors," TFR said, noting that the undersupply of locomotives meanwhile related to a suspended contract which has made it difficult for TFR to procure critical spares and components.

In recognition of the importance of the steel industry to the country, TFR said it was prioritising AMSA trains in order to close the performance gap. It was also deploying technicians on the actual trains and not just at the yards for quicker response and repairs of breakdowns. The company said it had also deployed added security to critical areas. 

Edited by News24Wire



Weir Minerals Africa and Middle East
Weir Minerals Africa and Middle East

Weir Minerals Europe, Middle East and Africa is a global supplier of excellent minerals solutions, including pumps, valves, hydrocyclones,...

SMS group
SMS group

At SMS group, we have made it our mission to create a carbon-neutral and sustainable metals industry.


Latest Multimedia

sponsored by

SEW-EURODRIVE at Nampo 2024
SEW-EURODRIVE at Nampo 2024
21st May 2024
Uniclox at Nampo 2024
Uniclox at Nampo 2024
21st May 2024
Dachser South Africa at Nampo 2024
Dachser South Africa at Nampo 2024
21st May 2024

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
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?







sq:0.407 0.463s - 139pq - 2rq
Subscribe Now