SA STAINLESS FIGHTS FOR ITS RIGHT TO SUCCEED
Sassda Executive Director Michel Basson outlines his ‘view from the top’ on key local sector topics such as the effect of global market constraints on local exports and the unprecedented power crisis. But… he also points out that despite these obvious challenges the industry remains ready to fight for its well-deserved place in growing the South African economy.
1. How would you categorise the performance of the South African stainless steel sector in the last three years - since the onset of the COVID-19 pandemic in March 2020? What is the state of the market at present?
The South African stainless steel industry is regarded as a world class supplier of stainless steel material and fabricated products but has felt the impact of the COVID-19 pandemic since 2020.
Bearing in mind that the local stainless steel industry operates in a weakened economy with little GDP growth, the South African stainless steel sector showed remarkable resilience in recovering from the restrictions brought on by the pandemic.
The sector is also well organised and well represented at government level. As such, the industry was allowed to re-open, after the hard lockdown restrictions in 2020, to a 50% level compared to the 30% for the majority of the general steel industry. This assisted the local producer and fabricators to keep the supply chain unbroken to a large extent.
Except for local industry constraints during the pandemic and the slow growth of the national economy, factors outside South Africa’s borders have also affected the apparent consumption statistics. The continuing conflict in Eastern Europe also impacts he export potential for the local industry with considerable effect on the local producer of stainless steel products.
2. Please can you give some other meaningful stats relating to how the industry has performed over the last 12 months?
In the graph below it is evident that the pandemic has impacted the local industry since 2020.
Note that apparent consumption was already declining before 2019 due to the weak local economy and that 2020 was merely a continuation of this movement. During 2021, this trend was reversed with improvements in local production and exports. There was also robust local demand leading to increased imports of flat products in 2021.
The statistics for 2021 were strong enough to cause a gradient switch in the trendline, however, the final results for 2022 were disappointing. The trend line switched back to a negative with both local production and exports shrinking. During the 2022 period, the exports of flat products declined to the lowest levels since this measurement was initiated in 2012. This decline in exports is mainly due to restrictions on the volumes for export to Europe that were initiated after the Russian invasion of Ukraine.
3. What are the key global and local sectors that have the greatest potential to drive demand for South African stainless steel and what role does the renewed interest in the concept of localisation by government have to play in this regard?
As mentioned earlier, the retraction in apparent local consumption is mainly due to lower production and exports. This will only be rectified when the conflict in Europe ends or is at least curbed to a level where the European Union removes the restriction on stainless steel exports to its member countries.
African markets would not offer a solution to the increased exports of flat material or at least not as a replacement for the restricted European markets. However, African markets do offer an unrivalled opportunity for locally fabricated products in stainless steel. This includes industrial capital equipment for mining, agriculture, food processing, and the health sectors.
The return to Africa during 2023 will be a focussed approach by various entities involved in the South African steel industry including government.
This resides within the structures of the Steel Master Plan and will take the form of an ‘SA Inc.’ type approach to advance the interests of the local steel industry and national economic interest.
Localisation will remain key in this effort. Localisation in simplistic terms refers to the local manufacture of goods that are currently being imported, with the view to not only meet national demand but to be competitive enough to service African markets as exports. This process has kicked off with excellent potential for success.
4. What are the biggest challenges facing the local stainless steel sector in the next 12 months, both global and local?
Although the local industry showed its resilience during the pandemic, it is now faced with new challenges in the form of an erratic energy supply.
The effect of the more than 200 days of limited electricity supply is part and parcel of the visible decline in apparent consumption during 2022. The predicted growth of less than 1% in the GDP will also have an effect, especially on our smaller members and the local industry will still be subjected to the volatility in the international economy, especially the European economic situation.
5. How has Sassda evolved during the last three years against the backdrop of unprecedented challenges that have faced, and continue to face, its members?
Sassda had no choice but to adapt. As the official voice of the industry, Sassda is sensitive to the environment that faces its members as well as that of the general industry. As mentioned, the local stainless steel has proven itself to be resilient to many challenges. It has adapted through spiking nickel prices, previous periods of loadshedding and many financial crises.
Part of this adaption process was to become more diverse in capacity and products, be more resource efficient and to be innovative. All the lessons learnt are now paying dividends. Our members remain world class organisations and it is Sassda’s responsibility to ease the road ahead as far as possible.
We are doing this by ensuring our industry is well trained through our educational products; by continuing lobbying and cooperation with government to the advantage of the industry (for example, Sassda influenced the dtic so that stainless steel is now excluded from the recently announced scrap export regulations); as well as to identify potential markets and assist members to access them.
6. What are some of the key projects/initiatives/programmes that Sassda will be championing in 2023?
Sassda believes that continuing our current strategy of educating, promoting and lobbying will remain key to growing the local stainless steel industry. By growing the volumes of the apparent consumption statistics and focussing on localisation, Sassda will contribute to value addition and job creation – both of which are of critical importance for growing the national economy and alleviating the socio-economic reality of our people.
