Unless import duties are reduced or made null for a period of time, steel shortages will continue to plague the domestic market, the National Employers Association of South Africa (Neasa) argues.
Currently, the largest steel manufacturer – ArcelorMittal South Africa (AMSA) has repeatedly assured both its customers and government that the backlogs would have been resolved starting from December 2020 with the reopening of the second blast furnace – Blast Furnace C – at its Vanderbijlpark facility.
AMSA reported on January 8 that the furnace was in full operation and would add around 600 000 t to South Africa’s yearly flat steel production.
“With all three blast furnaces fully operational at our Newcastle and Vanderbijlpark plants, we expect that we will be more than able to meet the steel requirements in South Africa and neighbouring countries in the coming months,” CEO Kobus Verster says.
However, Neasa says steel shortages locally (also a global trend resulting from Covid-19 supply chain disruptions) have continued to deteriorate, to the point where it is now an “industry-wide crisis”. The situation is currently still critical, reports Neasa.
AMSA confirms a shortage of steel, which it described as a global issue. “There have been increased lead times for supply from steel mills around the world, with most mills now quoting production dates in the second quarter of 2021, and for some niche products, even the end of the quarter,” he says.
Neasa says AMSA’s capacity, of late, has been sold out long before the actual closing dates for specific orders.
This means that the normal order lead-times have become irrelevant, with product allocations being done on a day-to-day basis.
Neasa posits that steel availability backlogs are not being appropriately addressed and are to remain an issue for at least the first half of the year.
However, Neasa alleges that the steel backlog and industry monopoly held by AMSA suit the manufacturer because AMSA’s local selling-price is nearly 50% more expensive than what it says is “better quality imported equivalents” which are imposed with import duties in any case.
“In general, as a result of the shortages, manufacturers are so desperate for steel that they pay nearly double for the raw material. This obviously results in a totally uncompetitive manufactured product,” states Neasa.
Verster states that with the restart of the second blast furnace in Vanderbijlpark, the increased steel capacity from the beginning of January 2021 will “quickly resolve” any remaining backlog issues.
Neasa puts forward that government’s “relentless support” for AMSA, by keeping the duties in place, is “mind-boggling”.
“If this is not enough reason to immediately suspend the duties, a huge question mark will arise on what government's motives actually are,” questions Neasa.
However, AMSA expects market demand to remain weaker than was the case in 2019 and Verster says it is, thus, “crucial that the maximum volume of domestic demand, is met by locally manufactured product”, as any excess production would be exported at a loss.