SA weathering steel crisis
Production up – but China worries remain
STEEL production in South Africa beat international trends by increasing last year – but, as in the rest of the word, the country faces rising threats from state-subsidised plants in China.
Latest World Steel Association figures show that production in South Africa jumped 20.8% year-on-year (y/y) last month to an estimated 650 000 tons.
This brought the rise in annual production to 16.3% to 7.6 million tons compared with a 2.8% decline in global steel production to 1.623 billion tons.
Last year, steel production decreased in all regions except some areas of the South Pacific, which registered a 4.6% gain.
The South African production rise began in June when a 2.3% y/y increase was the first of the year and heralded a turnaround in the fortunes of the domestic steel industry‚ which has been battered by increased steel imports.
South African steel production fell 7.6% y/y in the first half of last year to 3.2 million tons as the industry battled with electricity supply disruptions and subdued domestic demand.
Analysts say the poor demand was due in part to the government’s multibillionrand infrastructure investment plans failing to gain traction.
The main producer in South Africa is ArcelorMittal, which is also the world’s largest producer and is facing major pressure, particularly in Europe.
This has intensified so much that the company announced yesterday that it is mothballing a plant in Spain.
The company blamed record steel imports from China at below production prices and falling selling prices for the decision to shut the plant near Bilbao in Spain’s Basque country.
It produces slab and coil steel. Analysts say the Chinese are flooding the market with cheap steel as demand falls in their home market.
Most of China’s steel industry is governmentbacked, with Beijing subsidising production so that plants can run at a loss.
China now accounts for more than half of global steel production – up from 10% a decade ago
Chinese mills are pumping out steel at a loss of $34/ton (R559/t), according to trade body UK Steel.
The crisis has already claimed more than 5 000 jobs at British steel companies, which are under even greater pressure than their European counterparts because of higher costs and less generous tax regimes, UK steelmakers claim.
Meanwhile, companies across Europe are lobbying the authorities to copy the US by introducing import tariffs on imported steel, arguing that unless action comes soon, they will be unable to survive. – Additional reporting by The Telegraph
