STATE OF THE STAINLESS STEEL NATION
Sassda's Executive Director Michel Basson outlines his ‘view from the top’ on key local sector topics such as the latest on the Steel Master Plan, Sassda’s efforts to champion the use of local stainless steel holloware products, and why localisation has such a big role to play in growing the industry…
Q. What are the latest developments on the Steel Master Plan?
A. Over and above normal business prospects, work on the government’s Steel Master Plan (SMP) is continuing in earnest. A number of industry bodies and role players from the private sector are now fully involved in giving the initiatives forthcoming from the SMP some momentum. Opportunities to increase local demand are being investigated and forwarded to the dtic and IDC for input and assistance.
The localisation of items within the hollowware and cutlery sub-sector is being planned, as well as products in the catering and beverage industries. Keeping in mind that around 10 000 tons of stainless steel finished goods are imported each year with the vast majority of it being hollowware and catering items. This indicates that with such an initiative in place a sizeable share of this tonnage can be added to local consumption through localisation.
In theory, this type of initiative can add up to 5% to local consumption and lead to sustainable job creation. Some of the initiatives also focus on increasing local capacity for the manufacture of intermediary products such as pipe, tube, wire, etc.
Q. What is your full view on the importance of localisation for the local stainless steel sector?
A. Import replacement or localisation at first glance looks like a fairly simple process, but many things need to be considered. Localisation for the sake of localisation doesn’t make sense since the aim is to localise whilst remaining globally competitive and creating sustainable and meaningful work.
Thus, the selection and evaluation of different proposals become complicated.
Obstacles in the process would be the fact that capacity exists across different industry sectors, but that the complete picture of industry capacity remains somewhat grey. This is not the fault of any one entity, but rather a historic lack of inter-sectoral communication and cooperation.
A good example would be our current initiative to localise products in the hollowware, cutlery, and catering sub-sectors. Capacity to do pressings would be required and a sector-based capacity audit might report specific gaps. However, the automotive industry has an overcapacity on pressing capacity and the 10 000 t of localisation potential in this market can slip through our fingers if we do not communicate on a broader level in the industry.
Many instruments can also be used to make local products more attractive for local buyers such as designation and import duties, as well as some financial support to local suppliers. However, it remains a fine balance when evaluating these factors in terms of their longer-term impact on global competitiveness and sustainability.
Q. Please outline your work to champion the use of stainless steel products ‘by South Africa and for South Africa’?
A. Opportunities to increase local demand for stainless steel are clear in sectors such as government infrastructure and localisation rollouts, as well as export promotion and the greening of the industry, development of industry value chains, and ease of doing business as growth measures for our industry.
Of special interest, the localisation of stainless steel items within the hollowware and cutlery sub-sector is being planned, as well as products in the catering and beverage industries. Bearing in mind that around 10 000 t of stainless steel finished goods are imported each year, with the vast majority of it being hollowware and catering items, this indicates that with such an initiative in place a sizeable share of this tonnage can be added to local consumption through localisation. In theory, this type of initiative can add up to 5% to local consumption and lead to sustainable job creation.
Q. Please outline Sassda’s current key initiatives/work with government departments, e.g., the dtic, etc.?
A. Sassda has a strong partnership with the dtic and other structures such as the IDC and WECONA within government and, as such, is recognised as the official voice of the stainless steel industry.
As stated, Sassda has been very involved in the Steel Master Plan to develop local capacity, identify downstream demand, and stabilise the steel industry. In this regard, Sassda has assisted the government in terms of information, statistics, identifying potential suppliers to ensure full local participation in projects where 100% local content is required, and the training of technical staff in government departments.
As part of this process, Sassda has also identified the potential localisation of stainless steel products currently being imported in conjunction with industry partners such as BUSA and the Manufacturing Circle. One of the initiatives under this localisation drive is on increasing local capacity for the manufacturing of intermediary products such as pipe, tube, wire, etc.
Q. How would you categorise the performance of the South African stainless steel sector pre-COVID (March 2019-2020) versus March 2022 as well as its performance in the last six months - does this point to stagnation or growth?
A. Even before COVID-19 there was already a steady decline in the level of local stainless steel consumption. (The term consumption relates to the stainless steel used within the national borders of South Africa including the level of local production and imported material - less exports of material.)
When the growth figure for the 12 months leading up to March 2020 is compared to the number for the 12 months preceding March 2019, a drop of 18% was measured. Local consumption showed a decline from 145 000 t to 119 000 t pre-COVID-19. This was in line with an existing slowdown in the economy.
During the following year up to March 2021, apparent consumption declined further to around 75 000 t, but the industry made a good recovery by reaching consumption figures of 111 000 t by March 2022, bringing it back to similar pre-pandemic levels.
This is encouraging, but still not near the 150 000 t that were consumed annually between 2015 and 2018. It is also far from the annual consumption of around 200 000 t that was used in the years preceding 2015. In short, the levels of local stainless steel consumption have been declining for the last eight years and are still under pressure, even after seemingly having recovered from the effects of the pandemic.
That said, South African stainless steel products and expertise are still in high demand and, with current exchange rates, the future for our industry might be much brighter than the current figures indicate.
Q. What are the greatest challenges currently facing the local sector?
A. At this stage, a dependable energy supply tops the list. The bottomline is that initiatives to increase the local consumption of stainless steel - and there is a range of them - will have no impact without the ability to produce material using a reliable power supply.
For example, during the latter part of September this year, some of our energy-intensive members were not able to produce at all, but even less energy-intensive members were struggling to maintain the levels of productivity and efficiency required to remain competitive in their respective markets.
Another challenge is that global logistics problems are still impacting timeous exports and imports as well as shipping costs and fabrication lead times, and the current low state of efficiency at the national ports also does not contribute to solving the situation.
However, it is not all doom and gloom. Stainless steel is not only a preferred material for many industries and products, but in most cases the only material that would be used. Many projects in this regard have been halted by the pandemic, but still need to continue. For this reason, many sectors of the stainless steel industry report excellent current and medium-term order books with a good prospect to maintain this work level. Our member expectation index has shown that there was a steady increase over the last three months in business confidence and this measurement is currently hovering above 55%.