The drive to import certain quantities of steel has gained impetus during 2018, as a result of some doubts in the steel manufacturing industry about the ability of local mills to produce the required level of quality of certain products they require, steel processor and supplier Allied Steelrode executive director Warne Rippon tells Engineering News.
However, he highlights that there has also more recently been a concerted effort made by the primary steel producer to improve its product quality, and also to produce at least some of the products in question.
This comes as the first positive sign for the downstream steel sector, which Rippon notes has been forced to consider a variety of measures such as consolidating operations to diminish over-capacity in an attempt to mitigate the effects of the economic slowdown this year.
“There are a host of macroeconomic challenges which the industry is currently experiencing. For example, despite being a versatile and appropriate material for a host of different construction requirements, steel has to compete in the construction sector with cement, which is perceived as the new ‘go-to’ material,” Rippon comments.
He points out that questions have been raised as to whether steel and cement are equally tariffed, as it is alleged that steel is over-tariffed, and unfairly so.
“This factor, combined with extreme price volatility and the cost of labour in the steel sector, compared to that of industries such as cement, is making it extremely difficult to be competitive.”
Further, the requisite quality material for steel construction and cladding projects is not always available to the downstream steel sector.
Rippon believes that importing can be a viable solution, but only if the current tariff situation improves. “The downstream sector needs certain steel, such as MC 700, to be produced locally for fabrication and manufacturing. However, while the sector urgently needs certain steels, such as this, it is also not viable to import this material at any cost.”
Despite the challenges, Rippon says that Allied Steelrode is currently doing extremely well in terms of production.
“Although margins are still under pressure, we are seeing the first tentative signs of an economic upturn, which will signal a positive change in the downstream steel sector.”
He believes that if this improvement continues to pick up through the remainder of this year, despite the imminent December holiday shutdown, the industry should see a more positive and economically buoyant 2019.
Along with this economic resurgence, Rippon adds that the primary steel producer’s having taken positive steps to proactively address their previous quality challenges, has been noted.
“Regarding the challenges it faces, the mill has responded very positively recently. We are pleased to report that it has produced a new batch of MC 700 steel, which we have recently received. There has also been a second rolling thereof by the mill which has been very successful, and it is of the high level of quality which the steel industry requires,” he elaborates.
There has been a seismic shift to a more competitive mindset from the mill, which is looking at the restructuring and upgrading of their processes.
In less than two years, the various tariffs on steel are set to fall away and it is encouraging to see steel production company ArcelorMittal finally positioning itself more positively with its customers, so it will be able to prosper in a future tariff-free environment, Rippon enthuses.
Allied Steelrode has championed the cause of the downstream steel sector and as such, has engaged in an intensive multi-level advocacy campaign this year with all stakeholders, to bring about the changes required in the industry.
“We therefore applaud the efforts and commitment of the mill in taking note of our concerns, and addressing their quality and technology challenges,” he comments.
This, along with President Cyril Ramaphosa's economic stimulus package, will drive strengthened demand for steel, which should increase over the next 18 months.
From Allied Steelrode’s perspective, Rippon has also been pleased at the strong market response to the company’s beneficiated steel product, namely Allied Steelrode Stretcher Material (ASSM).
“Our ASSM brand has found particularly strong demand from the automotive sector, among others.”
“We trust that the supply of quality material, such as our ASSM, as well as the positive changes and signs we are seeing on the part of the primary producer will lead to overall increased competitiveness, which will also see the steel industry playing a more significant role in projects in sub-Saharan Africa, where a number of major infrastructure projects are being undertaken,” Rippon elaborates.
Notably, he highlights that some of these infrastructure projects are on the Zambian Copperbelt, where various mine expansion projects are taking place. This also signals an upturn in the commodities sector and a resurgence of the global economy.
“All of these factors will have a knock-on effect that will ultimately see a more buoyant 2019 and, we trust, a continuing period of economic prosperity,” he concludes.