SA is sourcing more and more steel from India and China as the local industry cannot cope with ever-increasing demand from the construction industry.
Imports of Indian steel were up 156% y/y to 146 000 t for the first nine months of 2006. More than half of this was hot-dipped galvanised coil and sheet. In terms of volume this accounts for more than three-quarters of SA's galvanised steel imports. Chinese steel exports to SA for the same period were R193m, 114% higher than the total for last year.
There were sharp increases in SA's import of rods, cold rolled sheet, coated strip and cold formed sections and bars. China became a net exporter of steel only last year. The Xinhua news agency reported that China's global steel exports were 92% or 33 Mt higher in the first 10 months of this year compared with the whole of 2005.
Steel consumption in SA hit a 25-year high this year, according to third-quarter SA Iron & Steel Institute (Saisi) statistics, and monthly average consumption is now exceeding 500 000 t.
Saisi's figures shows domestic carbon steel sales were up 27% in the first nine months of the year when compared with the same period last year. During this same period exports of carbon steel products fell more than 27%.
This unprecedented demand has meant that Mittal SA, which for years was able to get away with flabby performances, has had to pull out all the stops and improve its production processes markedly. Earlier this year the company admitted that it could not make any more galvanised product to supply the voracious domestic market.
Galvanising is a process where steel products are dipped into liquid zinc for coating to protect the metal from corroding. Hercu Aucamp, Mittal SA's marketing director, says imports of galvanised products have shot up from about 60 000 t last year to more than 130 000 t in the first 10 months of this year.
Demand for galvanised sheet is growing by as much as 8%/year, says Heyno Smith, GM of Mittal SA's Vanderbijlpark mill. "This is high and being driven by government's low-cost housing spend."
According to recent statistics, construction activity increased by more than 17% in the third quarter. T his growth was generated in an environment where precious little of government's R410bn infrastructure-related spend has materialised. It is against this backdrop that Mittal commissioned its new R110m galvanising line at Vanderbijlpark.
It takes the company's production capacity from about 500 000 t/year to 600 000 t/year.
But it's not only primary producers of steel that have felt the Chinese producers breathing down their necks. Ben de Klerk, GM at pipe and tube producer Robor, says the local industry has lodged an antidumping case with the department of trade & industry (DTI) over low-priced steel pipe imports from China.
The DTI is halfway through its investigation and representatives will soon be travelling to China to meet their counterparts in Beijing. De Klerk says the local industry believes the Chinese producers have unfair support and the industry has asked for a 25% duty to be slapped on galvanised pipe imports.
De Klerk says a similar route was successfully negotiated a few years ago to create relief for producers when the domestic market was under pressure from cheap Indian steel products.
With the restructuring of the Chinese steel market, large output cuts will be made as the state moves to shut down small, inefficient mills. Tax breaks on exports are also being phased out.
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