State of the Stainless Steel Nation

How would you categorise the performance of the South African stainless steel sector in the last three years?

The local decline in production and consumption, which was also experienced globally, was mainly caused by a decline

in economic activity due to the pandemic as well as global logistical issues. As the shutdown regulations were eased we expected a spike in stainless steel demand for re-stocking. This took place worldwide, and it was, we believe, the main driver for the growth of more than 20% in local consumption during 2021.

Although this was expected, it was also understood to be short lived as stock levels started to stabilise and the industry returned to normality. The domestic market continued with this growth trend and increased by more than 3% in 2022. This was significant, in light of the impact of the nickel price volatility during the early parts of 2022.

It was also encouraging that the rate of growth in local consumption of stainless steel showed an increase of more than 300% compared to the South African GDP growth during the first post-pandemic year.

The 2022 performance is even more impressive seen against the backdrop of a weak economy, floods, unrest, and the lack of electricity experienced by industry during the period. This momentum and the gains made in our work with the Steel Master Plan indicated a solid starting point for continued growth in the years to come.

Overall, since 2018 stainless steel exports from South Africa declined from around 450 000 tons per annum to just under 150 000 tonnes in 2023. This had a similar influence on the local production of stainless steel since local production is mainly driven by the export market. Local production nearly halved over the period bringing production figures to 218 000 tonnes. Bear in mind that the local production capacity is more than three times the current level. The result of this is a decline in the local conversion of stainless steel of around 16% during 2023.

How is Sassda championing the growth of the local stainless steel sector?

Sassda’s growth strategy within the framework of the Steel Master Plan is dual faceted. Our mandate speaks about the promotion of stainless steel use with an emphasis adding local value which will create tonnage and sustainable jobs. Localisation or import replacement of stainless steel products with high labour intensity such as the local production of beer kegs and cooking products would be able to create jobs with an increase of locally used tonnage of around 250 000 tonnes as a target. The strategy of driving higher tonnage in the local manufacture of electrical transmission towers and rural bridge infrastructure in the utility ferritic grades such as 3CR12 for corrosive and other sensitive regions of deployment.

These industry initiatives to create more locally converted tonnage are currently under threat with the Arcelor Mittal South Africa (AMSA) announcement regarding the closure of its long product facilities. The plants earmarked for closure were set to produce many of the profiles and products identified for these projects.

This means that 2024 will once again be a tough year for the local stainless steel industry. Most of our fabricating members work in carbon steel as well and the developments regarding AMSA would take its toll on our current industry activities.

What are some of the key projects flowing from the Steel Master Plan that Sassda is working on?

Hollowware: Sassda and its partners in the demand side structures in the Steel Master Plan have completed an investigation and a report on the local manufacturing capacity for This will now be presented to major retailers to gain possible commitment for potential demand.It has also been noted that the enforcement of SABS standards can be beneficial to local producers by restricting the imports of sub-standard goods. As such, Sassda is currently contemplating a repeat of theinvestigation done a decade ago regarding the quality of hollowware available from retailers in South Africa.

The study entails the purchase of a range of stainless steel items available in retail stores. This will be followed by tests for material quality, against the SABS Standard 998 which specifies the technical aspects of acceptable hollowware. The results of such a study would potentially highlight serious discrepancies in quality and identify possible dumping practices. It would also have the effect of encouraging the public to purchase local stainless s teel products.

Structural profiles: We remain committed to getting 3CR12 included in the national standards for electrical transmission towers and rural bridges. This will open additional markets for structural profiles and possibly Whereas kegs and hollowware can be regarded as job creators, structural use will be tonnage generators. However, this strategy was largely dependent on the local carbon steel industry’s capacity to roll form the structural profiles to the required standards. The announcement of the closure of the AMSA long products, put a damper on this strategy, since these plants were identified to produce structural profiles. Sassda therefore participated in industry discussions and supported the work and efforts done by ISF, SAISI and BUSA amongst others to be able to postpone or delay the closure date for 6 months.

What is Sassda’s stance on the proposed closure of ArcelorMittal’s long steel operations in South Africa?

AMSA is a significant supplier of long steel products to the South African manufacturing industry supplying approximately 450 000 tons a year of product that cannot be supplied by the local mini mills due to capacity, capability, and quality constraints. The resulting steel shortages will lead to the almost immediate closure of industries that are reliant on the supply of long steel from AMSA.

Automotive steel components are typically safety critical. The automotive industry bodies advised that any change in the supply chain requires substantial time for approval and typically takes more than a year. This could cause a halt in auto production or at least a very uncompetitive scenario. The direct job losses at AMSA are quoted as 3 500, industry experts estimate the immediate indirect job losses at 30 000 which includes service providers to the AMSA plants.

The following quantitative impact analysis was submitted by the auto industry:

• Local steel tonnage loss: +- 70 000 tons a. plus SAAM35 volumes forecast at more than 100 000 tons.
• Cost increases due to importation: 25% to 35%.
• Knock on effect to losses of related sub & full assemblies: More than 7% resulting in an estimated R35-billion p.a.
• Suppliers at risk: Approximately 17 suppliers will be directly affected (Domestic OEM suppliers plus exporters).
• OEM & Supplier Profitability Erosion due to loss of localisation: No longer qualifying content for the Automotive Production Development
• Short-term jobs impacted: +- 30 000 including suppliers and backward linkages, growing in the medium to longer term.

Against this challenging background how does Sassda see 2024 playing out for the local sector?

A key part of Sassda’s role is to identify potential avenues for localisation and increases the local tonnage converted. However, the bottom line for the growth of the stainless steel sector in terms of employment figures and tonnage consumed would be the local socio-political environment and improvement of service delivery with a major focus on improving the consistency of electricity supply, rail transport and port efficiency. We are also acutely aware that this is an election year that brings a lot of uncertainty and volatility. The immediate future does not have a positive slant, but we trust that in time our industry will shine again because stainless steel remains simply brilliant.

The timespan covered by the graph indicates various sector activities and acts as a snapshot of the COVID-19 and post-pandemic unfolding of events. The negative historic growth rate continued and accelerated during 2020 when the industry experienced severe COVID lockdown conditions.

To some extent, this was mitigated by Sassda’s work to get the dtic approval for the stainless steel to run at a 50% capacity compared to the 30% required for other industries.