The South African Institute of Steel Construction (SAISC) reports
that the steel-construction industry can look forward to a buoyant
next few years. According to SAISC executive Dr Hennie de Clercq,
this is in spite of some challenges that the local industry has had
to face, including the strength of the rand and recent price hikes.
The strong rand, says De Clercq, contributed to the delay in large
infrastructural projects.
“Early last year, we expected the steel-construction industry to be buoyant due to the number of large projects that were scheduled to take place.
“However, many of them have not materialised to date, but we expect them to materialise soon.” De Clercq says that many of the large projects were affected by the strong rand, as much of the planning took place when the rand was weaker, resulting in them being economically unviable with the rand at current levels.
“One of the projects that promised to be extraordinarily large was Project Turbo, which has turned out to be smaller than we anticipated and started later than expected.
“Another project that has not materialised is the aluminium smelter project at Coega, in the Eastern Cape, due to the takeover of Pechiney by the Canadian company Alcan.
“In the case of the large power-station projects, for example, these will have to be undertaken if South Africa’s electricity needs until the end of the decade are to be met.” These projects will require significant volumes of steel, which will be advantageous to the steel-construction industry.
De Clercq notes that the Department of Minerals and Energy has committed to launch these power-station projects in the near future.
While another effect of the strong rand was a decrease in exports because of decreased competitiveness in the global market, De Clercq says it is important to note that exports have not dropped as significantly as was anticipated, and South Africa, in general, is getting to grips with the strong rand. He notes that small- and medium-sized companies performed particularly well in the first half of this year.
Another challenging situation was the recent price hikes in steel, which were of such a magnitude that it was difficult for the industry to respond quickly enough.
De Clercq explains that price hikes of this magnitude have never been experienced in the industry in the past and everyone was caught off guard. This resulted in companies not having sufficient time to take precautionary mea-sures that could have reduced the effect on them.
“We have, however, learnt from this experience, and have developed systems and procedures to assist the industry in the future,” De Clercq tells Engineering News.
He adds that the companies most affected were those tied into long-term contracts. These companies based their pricing on a historical view of what the steel price would be and could not foresee the unprecedented price increase. As a result, these companies are suffering losses.
“The problem with the steel price hike was not the price level as such, but rather the rate of increase. “It is unusually large changes, whether up or down, that cause problems, as it is difficult to plan for such scenarios,” says De Clercq.
“We believe that we have seen the last significant price increase for some time; most indicators on the world market point to a more stable situation, especially since China, which was partly to blame for the increase, seems to have stabilised somewhat,” he says.
On the industry in general, De Clercq is concerned that there are skills shortages, especially in draughters and design engineers.
He adds that the main challenges in the steel-construction industry are skills development on all levels and black economic empowerment.
Skills development at the higher levels is particularly significant, since these skills take a long time to develop. “If the industry is to remain dynamic in the future, there needs to be a constant influx of bright young people.
“We are dissatisfied with the rate at which this is happening,” De Clercq says.
He notes that SAISC, in conjunction with other sectors of the industry, is committed to the development of a BEE charter.
“Significant progress was made with respect to the charter by a group of associations, representative of all facets of the construction industry, and we expected it to be approved and gazetted by February next year.
“However, quite recently, the Department of Public Works, which had stood largely on the sidelines until then, and some organis-ations that were not involved in the process previously, became involved.
“Consequently, the scope of the exercise has increased significantly, incorporating aspects which we believe are beyond the scope of the BEE Act.
“We anticipate that this will result in the process being drawn out and becoming more politicised, possibly extending finalisation to the end of 2005,” says De Clercq.
On the topical issue of World Cup 2010, De Clercq says that infrastructural developments leading up to the 2010 Soccer World Cup, to the value of some R2-billion, are also expected to have a positive influence on the steel-construction industry.
“We are optimistic about the industry, as we expect a good few years ahead in terms of large projects.
“The market will be different to what has been experienced to date in the range of demands upon it.
“However, over the years those in our industry have learnt to be flexible, with most companies able to perform a variety of functions, rather than specialising in a specific area of steel construction and we are confident that the industry will cope well with the changes,” says De Clercq.
“Early last year, we expected the steel-construction industry to be buoyant due to the number of large projects that were scheduled to take place.
“However, many of them have not materialised to date, but we expect them to materialise soon.” De Clercq says that many of the large projects were affected by the strong rand, as much of the planning took place when the rand was weaker, resulting in them being economically unviable with the rand at current levels.
“One of the projects that promised to be extraordinarily large was Project Turbo, which has turned out to be smaller than we anticipated and started later than expected.
“Another project that has not materialised is the aluminium smelter project at Coega, in the Eastern Cape, due to the takeover of Pechiney by the Canadian company Alcan.
“In the case of the large power-station projects, for example, these will have to be undertaken if South Africa’s electricity needs until the end of the decade are to be met.” These projects will require significant volumes of steel, which will be advantageous to the steel-construction industry.
De Clercq notes that the Department of Minerals and Energy has committed to launch these power-station projects in the near future.
While another effect of the strong rand was a decrease in exports because of decreased competitiveness in the global market, De Clercq says it is important to note that exports have not dropped as significantly as was anticipated, and South Africa, in general, is getting to grips with the strong rand. He notes that small- and medium-sized companies performed particularly well in the first half of this year.
Another challenging situation was the recent price hikes in steel, which were of such a magnitude that it was difficult for the industry to respond quickly enough.
De Clercq explains that price hikes of this magnitude have never been experienced in the industry in the past and everyone was caught off guard. This resulted in companies not having sufficient time to take precautionary mea-sures that could have reduced the effect on them.
“We have, however, learnt from this experience, and have developed systems and procedures to assist the industry in the future,” De Clercq tells Engineering News.
He adds that the companies most affected were those tied into long-term contracts. These companies based their pricing on a historical view of what the steel price would be and could not foresee the unprecedented price increase. As a result, these companies are suffering losses.
“The problem with the steel price hike was not the price level as such, but rather the rate of increase. “It is unusually large changes, whether up or down, that cause problems, as it is difficult to plan for such scenarios,” says De Clercq.
“We believe that we have seen the last significant price increase for some time; most indicators on the world market point to a more stable situation, especially since China, which was partly to blame for the increase, seems to have stabilised somewhat,” he says.
On the industry in general, De Clercq is concerned that there are skills shortages, especially in draughters and design engineers.
He adds that the main challenges in the steel-construction industry are skills development on all levels and black economic empowerment.
Skills development at the higher levels is particularly significant, since these skills take a long time to develop. “If the industry is to remain dynamic in the future, there needs to be a constant influx of bright young people.
“We are dissatisfied with the rate at which this is happening,” De Clercq says.
He notes that SAISC, in conjunction with other sectors of the industry, is committed to the development of a BEE charter.
“Significant progress was made with respect to the charter by a group of associations, representative of all facets of the construction industry, and we expected it to be approved and gazetted by February next year.
“However, quite recently, the Department of Public Works, which had stood largely on the sidelines until then, and some organis-ations that were not involved in the process previously, became involved.
“Consequently, the scope of the exercise has increased significantly, incorporating aspects which we believe are beyond the scope of the BEE Act.
“We anticipate that this will result in the process being drawn out and becoming more politicised, possibly extending finalisation to the end of 2005,” says De Clercq.
On the topical issue of World Cup 2010, De Clercq says that infrastructural developments leading up to the 2010 Soccer World Cup, to the value of some R2-billion, are also expected to have a positive influence on the steel-construction industry.
“We are optimistic about the industry, as we expect a good few years ahead in terms of large projects.
“The market will be different to what has been experienced to date in the range of demands upon it.
“However, over the years those in our industry have learnt to be flexible, with most companies able to perform a variety of functions, rather than specialising in a specific area of steel construction and we are confident that the industry will cope well with the changes,” says De Clercq.
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Edited by: zeena isaacs
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