Industry Insight

Each year we ask Sassda Acting Executive Director Michel Basson to give us an overview of the sector’s performance in the last 12-months as well as some key information and insights. Here is his outlook on a year like no other and the bright spots of potential on the horizon…

How would you categorise the performance of the South African stainless steel sector in the last two years with specific reference to the current performance where primary consumption levels have returned to 2018 levels? What has allowed that to occur?

The performance of the local stainless steel industry has been confirmation of what we have seen during similar times of global economic crisis. It has once again shown adaptivity, innovation and resilience.

Our sector was one of the first to be able to start up after the initial lockdown at 50% capacity compared to the 30% of most others. This was due to the sector’s ability to cooperate and organise quickly and intelligently. The industry certainly didn’t come through the past two years unscathed but it is showing pre-pandemic consumption levels.

Please can you give some other meaningful stats in terms of how the industry has performed over the last 12 months?

We pay attention to what our members tell us. Our member’s monthly confidence index has, since the sharp decline to just over 20% during the hard lockdown in 2020, showing a steady increase to date. This “three-month outlook” indicator has shown confidence levels of more than 50% for the past six months whilst peaking at a record high of 64%. This has been the highest level since we have starting to measure in 2017.

The apparent consumption figures at the end of 2021 show that the local industry consumes volumes of stainless steel last recorded in the period between 2015 and 2018.

Elaborate on the Steel Master plan’s role in assisting industry growth despite the various challenges the industry has encountered?

The Steel Master Plan (SMP) is a focused set of practical steps which must be implemented consistently. The SMP should be regarded as a process, and it is important to understand that it is not a government-only intervention in the steel industry.

The emphasis in the Master Plan is on concrete commitments by each of the major stakeholders throughout the complete value chain such as investors, manufacturers, organized labour, supplier, and customer industries, as well as public sector entities.

The stainless steel industry has been assisted through this plan to open at higher levels of employment during the initial stages of the pandemic, through measures to give the industry a temporary breathing space.

Although the general industry is still in crisis, there is investment taking place. It is the view of several investors that because of the significant excess capacity in both the upstream and downstream industries, the investment is limited and is like to continue to be muted until demand increases and there is consolidation in the industry. It is now up to the stakeholders in the SMP to seize the opportunity offered by recent global disruptors by  identifying and penetrating new markets.

What types of policies and implementation the government must introduce/ enforce to improve the socio-economic environment to ensure growth for the sector?

As it relates to the stainless steel industry, the objectives of government through dtic are in line with that of the Association. To improve socio-economic conditions, jobs must be created. One of the vehicles for this in the stainless steel sector will be localisation or import replacement. We know our industry is globally competitive and certain measures focussed on increasing local content in local projects can make a definite difference. The problem is not so much the policy or measure, but what the outcome will be. If localisation is done in a way so that the specific industry remains and develops as globally competitive in terms of price and quality, then we can assume that the jobs created will be proper jobs and sustainable.

What are the key local demand sectors that have the greatest potential to drive demand for stainless steel. Please can you add a comment on how the renewed interest in the concept of localisation by government has a role to play here?

The fact that global supply routes are still under pressure and expected to remain that way for some time, opens a whole new perspective on potential new supply and new markets. We foresee that the automotive industry (with all its sub-sectors) will be revived to a pre-pandemic level. We also believe that there would be growing potential for South African stainless steel, stainless steel products and stainless steel skillsets in African countries, especially in Eastern Africa. How the conflict in Ukraine will affect global conditions for stainless steel is still uncertain. It certainly has a further impact on global logistics and the financial uncertainty regarding future food and energy prices puts South Africa under further pressure in
terms of future economic growth.

Stainless steel prices will be affected seeing that Russia is a major global producer and supplier of nickel. This will be a price driver for austenitic grades and, to some extent, the duplex grades. This offers the opportunity for our innovative sector to promote the use of the less costly ferritic alternatives in some applications.

What are the biggest challenges facing the local stainless steel sector in the next 12-months?

The biggest hurdles reside outside the sphere of influence of the industry. This entails aspects such as reliable and affordable electricity supply – now at even higher risk as mentioned earlier, improved efficiency of export nodes with a focus on ports; the level of political will to act against  perpetrators of corruption and crime, and a clear national economic growth plan. Issues such as productivity, reduction of waste, improved quality can be  controlled within our industry. The local industry has a proven track record to be globally competitive. If the socio-economic environment wherein we function can be improved through sound policies and implementation by the government, the South African stainless steel industry can compete with all global players.

What are some of the key projects/initiatives/ programmes that Sassda will be championing in 2022 – please provide a brief description of each plus motivation for, and benefits of, each?

As always, we will act to stimulate and increase the growth of stainless steel conversion in Southern Africa. This means increased tonnage used, but also, increased job creation. We will do this through our standard training products that have been enhanced for 2022; we will safeguard the industry by continuing gathering, measuring and acting on industry-specific statistics; we will find, investigate and introduce our members to new potential markets; we will create awareness to increase local consumption per capita, and we will empower people. There will be a special focus on the empowerment of women in our industry during 2022 as part of our commitment to the Steel Master Plan and WECONA (Women Economic Assembly).

Discuss the opportunities opening up on a global and local scale that the local industry can take advantage of to facilitate industry growth?

The opportunity staring us in the face is our home continent. Africa remains one of the most underutilised new markets for our industry. The government is facilitating African trade through various agreements with our neighbours to streamline the flow of products through the continent
which is internationally regarded as a largely untapped market. Chinese subsidies and export rebates on stainless steel products are diminishing, making local products even more competitive on a much more even global playing field. Global logistics is expected to remain a fair mess for at least the next two years, and this offers the opportunity for new supply chains and collaboration, especially with cross-Atlantic entities and countries in South and North America. Europe can also offer new potential for South African products and skills.