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The South African Iron and Steel Sector
The South African steel industry is a key strategic industry, which contributes 1.5% to the country’s GDP and employs 190,000 people directly plus another 100,000 people who are employed by suppliers to the sector. Steel is a key enabler of every part of the economy, and is critically linked to the automotive, mining and construction sectors, which combined contributed 17% or R570bn to GDP in 2014 and employed 8 million people. However, the future of the entire South African steel industry is under severe threat with steel producers unable to compete with cheap Chinese imports flooding into the South African market and selling at 25% below local production costs.
There have been a number of important developments in the local steel sector during 2015. The announcement in April by Evraz Highveld Steel and Vanadium that it had filed for business rescue, followed by ArcelorMittal South Africa threatening to close its plants in Vereeniging and Scaw Metals, South Africa’s third-largest steel producer, closing three plants emphasised the catastrophic impact of cheap imports and reduced consumption on the steel industry. Losses of between 10,000 and 16,000 jobs are inevitable despite the approval by the Department of Trade and Industry (DTi) in August of the imposition of a 10% duty on certain imported steel products. The establishment of an emergency task team consisting of representatives from business, labour and government has resulted in a list of measures that need to be implemented if the closure of most steel producers in the country is to be prevented.
The report on the Iron and Steel sector discusses the latest developments in the industry and the range of government interventions aimed at stimulating local manufacture in the upstream and downstream sectors. The report also profiles 31 industry players, including manufacturer Evraz Highveld Steel and Vanadium Ltd, which received a buy-out offer of R350m from Hong Kong-based International Resources Limited (IRL), thus managing to avoid liquidation. Also profiled are a number of steel merchants and downstream manufacturers such as Pro Roof Steel Merchants (VRN) (Pty) Ltd. and Africa Pipe Industries (Pty) Ltd.