The South African stainless steel industry is under pressure due to the influx of cheaper imports from China especially after the U.S. tariffs announcement in the month of Mar’18. The industry is also battling with domestic factors such as high labour costs and rising electricity costs as informed by Sassda (South African Stainless Steel Development Association). Sassda has about 400 member companies and promotes the conversion of stainless steel primary products to stainless steel finished products.
In addition to this, the trade tariffs of 25% on steel imports into U.S. is also a major blow to the country as South Africa has become one of the key stainless steel exporters to U.S. and its exports to U.S. have increased significantly from 2011 to 2017.
According to Sassda, one of the main reasons of concern for the country’s stainless steel industry is falling apparent steel consumption. South Africa produces about 500,000 tonnes of primary stainless steel a year and imports about 40,000 tonnes a year whereas local stainless steel consumption is about 150,000 tonnes a year thus resulting in excess availability of stainless steel.
Also, stainless steel from China are more preferred by the local end user industry as Chinese imports are cheaper. This is because of a number of factors, including the use of automation, six-day work weeks, higher productivity and subsidize resulting which South African producers could not compete with the imports on price.
The increase in Chinese stainless steel export also stems from the significant rise in China’s production of stainless steel into the global market, especially over the past few years. The country’s state-owned producer has increased its production of stainless steel from 3.8% of global production in 2001 to a whopping 54.5% in 2016, resulting in excess supply into the global market.
The South African stainless steel industry is also concerned about the effect of the proposed Chinese financed USD 10 billion metallurgical complex in Limpopo province of South Africa. According to Sassda top official, there is no capacity in the local market to absorb additional stainless steel output and thus the production from the proposed complex would have to be exported.
In an effort to address this problem of lowered apparent stainless steel consumption, the local industry is looking for markets in the rest of the African continent which is home to some of the highest growth rates in the world and is looking out for the opportunity where Sassda can secure lucrative supply contracts.
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