Africa|Business|Cutting|Export|Manufacturing|Stainless Steel|Steel|Manufacturing |Products
Africa|Business|Cutting|Export|Manufacturing|Stainless Steel|Steel|Manufacturing |Products

Local mill essential to the stainless steel market

28th October 2022


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The South African stainless steel market is at risk given the pressure on local stainless steel manufacturer Columbus Stainless, says steel merchandiser and distributor Macsteel CEO Mike Benfield.

For any mill to produce optimally by gaining efficiencies of scale and cost competitiveness, it requires orders in large volumes, says Benfield.

“The South African market is not large enough to sustain a domestic producer alone and it must rely on export markets for the excess capacity.”

The South African stainless steel industry has, since the pandemic started in 2020, faced turbulent and often extremely challenging business conditions. Stainless steel was not protected from these factors and the product was even more price volatile than other metal groups, he adds.

Additionally, the war in Ukraine this year, had the same effect on the stainless steel price as that of other commodities, such as nickel. Nickel – the most important driver of austenitic stainless steel cost – spiked to levels in excess of $100 000/t in early March, which was $22 000/t the preceding March.

For every $1 000 change in the nickel price there is a roughly $85/t increase in the raw material cost and therefore on the selling price of stainless steel. This has made the product unaffordable and resulted in a crisis for the global Industry, states Benfield.

Further, trading in nickel on the London Metal Exchange was briefly suspended in March, which resulted in stainless steel mills globally temporarily ceasing production. The nickel price has since stabilised, but the panic created has caused damage to the future of the austenitic grades owing to price volatility.

Benfield says these challenges have been exacerbated by the “dramatic” weakening in the rand against the US dollar. As the raw materials that are used to make stainless steel are traded in a US dollar equivalent currency, there has been renewed upward pressure on domestic stainless steel prices.

In the past, the European market was the destination for most of these products. Access to this market has been significantly reduced owing to duties and quotas imposed by the European Union (EU) on South Africa.

Global overcapacity and very low-cost markets such as mainland China, India and Indonesia, reduces the viability of alternative export markets, which in turn, places the viability of the South African producer under threat, he says.

“The numerous advantages of a domestic mill cannot be overstated and range from the key role it plays in providing employment, to shorter lead-times of product to the customer.”

Benfield notes that Macsteel has always maintained and supported South African producers of steel and believe that the strength of any downstream manufacturing industry requiring steel, is reliant on a viable, cost competitive local producer.

He explains that Macsteel has aligned its business to the market’s stainless steel requirements by optimising its offering across the range of stainless steel products. The Macsteel VRN business unit specialises in the supply of stainless flat product, stainless round and flat bar and value added processes like laser cutting, rolling and bending.

Edited by Zandile Mavuso
Creamer Media Senior Deputy Editor: Features




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