South Africa’s sole producer of stainless steel, Columbus Stainless, part of the Acerinox South Africa Group, reports that the company has the capacity to produce one-million tons a year of stainless steel; however, this is dependent on a number of variables.
Columbus Stainless CEO Dave Martin says that the one- million tons a year is a definite goal of the company; how- ever, the biggest challenge facing this figure is the availability of power from State-owned power utility Eskom.
“Columbus will try to increase its melting throughput within the constraints of the imposed 90% power limit that has been put onto the company by Eskom. This may result in one-million tons a year only being achieved once Eskom has sufficient capacity,” says Martin.
Columbus adds that the company has come to an agreement with Eskom that prevents load-shedding at Columbus’s Middelburg production plant provided Columbus reduces its energy consumption by the required 10%, which has already been achieved.
The second variable that will determine when Columbus will achieve its one-million-ton-a-year target is the demand of the market.
Martin reports that only 20% of the company’s capacity is taken up by the local market. “Because the South African market currently only accounts for 20% of the company’s capacity demand, Columbus is well placed to increase its supply into the local market.”
The Southern African Stainless Steel Development Association (Sassda) reports that 2007 saw decreased imports and a slight increase in local consumption of stainless steel in contrast with a contraction in demand worldwide.
Sassda former MD Michael Campbell reports that in May 2007, the nickel price dysfunction resulted in customers buying large volumes of stainless steel in a situation where they were sitting on high-price inventory. Being unsure of the nickel price trend, customers who were sitting with inventories were selling volumes into the market in an attempt to destock, which resulted in fewer imports and a slowdown in local consumption. The main effects of this dysfunction were felt towards the end of 2007.
However, Martin reports that because stainless steel has particular attributes that are necessary for a wide variety of applications, there will be a sustained demand for the consumption of stainless steels worldwide.
The fact that the local demand only makes up 20% of Columbus’s capacity indicates that the lion’s share of the company’s capacity is serving the export market, a large portion of which is currently serving the commodity-hungry Asian market.
The demand from the Asian market could last for some time. In February 2008, Econometrix senior economist Robert Jeffrey reported that the demand from the Asian market would last for the foreseeable future and could extend as far as the next 20 years. Jeffery said that, while the US economy was going through its slump and subsequent recovery, the gross domestic product growth in China could fall from in excess of 10% a year to a more moderate, but very acceptable, rate of 6% plus a year.
The one-million-ton-a year target that Columbus has set itself is in line with the production capacities at other companies in the Acerinox group. Reports show that Algeciras, Acerinox’s main production facility in Spain, has a melting capacity of 1,1-million tons a year, a hot rolling capacity of 900 000 t/y, and a cold rolling capacity of 600 000 t/y and North American Stainless in the US has a melting capacity of 1,4-million tons a year, a hot rolling capacity of 1,2-million tons a year, and a cold rolling capacity of 900 000 t/y.
Martin reports that the company has identified specific growth areas within the South African market to grow the company’s sales.
One such area is the 2010 FIFA World Cup, where the stadiums that are being built from scratch and being refurbished are steel intensive. The company has also targeted the Gautrain project as a significant growth area for stainless steel.
Other growth areas include the power sector, where Eskom is embarking on its capacity expansion projects, such as Medupi and Project Bravo, and the resources sector where new mines and pro- cess plants are being established in South Africa and further into the African continent.
Martin concludes that Columbus believes that in the future South Africa could be used as a stainless steel manufacturing base for the wider African continent.