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South Africa stainless steel makers under pressure

Southern African local stainless steel industry is taking strain because of cheaper imports from China while also battling domestic factors such as high labor costs and rising electricity prices. Southern African Stainless Steel Development Association said that this compounds the effects of the recent imposition of a 25% trade tariff on imported steel in the US. SA was one of the countries whose exports to the US increased significantly from 2011 to 2017. As a result, steel flat products, steel long products and steel pipe and tube products were subject to the 25% tariff. The move would severely affect exports of flat rolled stainless steel.

Sassda executive director Mr John Tarboton said the hostile global trade market has raised the need for a strong local market, thus reducing local producers’ reliance on exports.

SA produces about 500,000 tonnes of primary stainless steel a year and imports another 40,000 tonnes a year. Local stainless steel consumption is about 150,000 tonnes a year, according to Sassda. Tarboton said Chinese imports are cheaper because of a number of factors, including the use of automation, six-day work weeks, higher productivity and subsidies. As a result, SA producers could not compete with the imports on price.

The China factor also had a key role to play in the recent imposition of a 25% tariff on SA stainless steel imports into the US market.

Mr Tarboton said that “This stems from the huge increase in China’s production of stainless steel into the global market with, for example, the country’s state-owned producer increasing its production of stainless steel from 3.8% of global production in 2001 to a whopping 54.5% in 2016, resulting in excess supply into the global market.”

The industry is concerned about the effect of the proposed Chinese-financed USD 10 billion metallurgical complex in Limpopo, he said. There is no capacity in the local market to absorb additional stainless steel output. Output from the proposed complex would have to be exported, he said that “The concern is that the local stainless steel market is relatively small.”

Stainless steel producer Columbus Stainless “exports about 75% of their product.
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