The World Steel Association has lowered its forecast for steel demand for 2022, anticipating that the demand will have contracted by 2,3% this year, as the global economy struggles with macroeconomic headwinds.

Under pressure

The steel industry in South Africa has been under pressure for years due to a lengthened period of economic decline. Prior to the pandemic, low domestic demand and a depressed global market were negatively impacting the local steel sector, leading to unprecedented job losses.

South Africa’s iron and steel industry was one of the main pillars of the local economy until as recently as two decades ago. The industry’s contribution to the gross domestic product (GDP) has fallen significantly since the 2009 financial crisis, primarily as a result of cheaper imports, challenging trading conditions, high tariffs and insufficient local infrastructure investment.

Unprecedented all-round impact

The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) estimates that between 2007 and the second quarter of 2019, the metals and engineering industry had shed about 49 000 jobs, 38 000 being in the metals sector. Since 2015, approximately 1 000 companies were liquidated and more than 300 companies were put into business rescue when duties were imposed. The pandemic and lockdown restrictions limited economic activity and intensified the impact.

Masterplan

A steel industry masterplan was signed in 2021, aiming to revitalise South Africa’s struggling downstream steel industry. Saving a strategically important industry, such as the steel industry, has merit as a competitive downstream steel industry would have a number of multiplier benefits for the economy. Any strategies to revitalise the industry must prioritise and ensure the industry’s overall long-term competitiveness.

This inevitably requires scrapping import duties on steel, which will be beneficial locally to ensure a more stable and competitive local market. Local steel businesses must seek export opportunities in the hope to grow, due to the limitation on local roll-out infrastructure.

Problem: Struggling steel industry in a competitive post-Covid-19 climate.

Solution: A strong export market for locally produced steel to be created.

Light at the end of the tunnel

For local steel companies to be sustainable, a strong export market for locally produced steel products must be created. Raw materials at a competitive price must be acquired from the international market.

The World Steel Association expects that the demand for steel globally will start recovering in 2023, growing by an expected 1%. South Africa’s steel sector needs to ensure that it is competitively positioned if it hopes to benefit from this upturn.

Ensuring competitiveness

To ensure that it is competitive, the industry must focus on:

• Addressing energy constraints.
• Efficiency improvement.
• Human capital.
• Skills development.

Companies developing much needed skills

PFERD-South Africa will assist in developing skills. They are an industry leader in the development, production, support and distribution of premium tool solutions, and established a training academy providing free training to operators of abrasive equipment. They believe that training plays an important role in optimising operational efficiency as companies will benefit from reduced equipment bills, as it requires less frequent replacing. Safe work practices reduce injuries, leading to reduced operator downtime and ultimately increasing productivity.

For more information, contact PFERD
Tel: +27 11 230 4000
Email: info@pferd.co.za
Website: https://za.pferd.com/

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