News / National
South African commentator downplays Zimbabwe's giant steel plant's capabilities?
01 Dec 2024 at 07:33hrs | Views
'It will just add to surplus capacity in the region, and the only way to safeguard against the commodity trade is to start adding value to the steel product itself' – Charles Dednam, South African Iron and Steel Institute.
JIMMY MOYAHA: There's a company in Zimbabwe called Dinson Iron and Steel Company; shortened, it says Disco. I didn't make up the abbreviation. The abbreviation is there, make of it what you will. They have finally gotten their production online earlier this year for one of their big plants that is a steel-producing plant in Zimbabwe.
Now, this is interesting because we as South Africa still import quite a bit of steel at an affordable rate, despite the fact that we have the likes of ArcelorMittal and an entire steel sector in South Africa. We're going to take a look at this. We're going to take a look at what these developments mean for the steel sector.
Joining me to take a look at this is the secretary general of the South African Iron and Steel Institute, Charles Dednam, to take a look at this and see if we can understand it. Good evening, Charles, thanks so much for taking the time.
These developments, obviously developments outside of our borders, nothing much we can really do about them, but I want to start by taking a look at the state of the South African steel sector. We're dealing with tariffs, we're dealing with duties, we're dealing with a scrap policy. There's a lot of confusion and back and forth and everything. What's happening at the moment?
CHARLES DEDNAM: Actually, at this point in time, a lot of uncertainty with regard to policy.
I think policy uncertainty is maybe one of the prime things that's hampering the steel industry at this stage.
Demand is very subdued. So we will be seeing about a 13% drop in demand, measured against last year and we will still be looking at about 30-plus percent imports of total steel demand, which is actually leaving quite a small amount for the local steel mills to supply into the local market.
JIMMY MOYAHA: Now Charles, part of the uncertainty that exists, from a policy perspective, is obviously that uncertainty that's aimed at protecting the sector. We had been hoping that the government would give us some policy certainty so that the local manufacturers can at least have some certainty around how much of the market they can actually supply.
If we don't have this uncertainty and we continue to see the demand come down, but we also continue to see the increase in the imports coming into South Africa, what does that do for the steel sector? Obviously, it's already under pressure, it can't really sit there and take much more of the pressure from all sides, can it?
CHARLES DEDNAM: Well, that's true, Jimmy, it's quite difficult for the local producers to stay afloat. I think it's coming from various sides.
So it's not only that the demand is falling back, it is also pressure on prices as the imported product is coming in at very competitive prices.
So, to actually stand your chance to supply the market, you have to be competitive in this particular market.
But with regard to the policy situation, I think although the perception is actually created that a lot of trade protection has already been afforded to the primary steel industry, but just looking at the result is that it hasn't had much effect on the imports and the volumes that are actually coming into the country.
So I think a lot can be done around the policy side as well.
JIMMY MOYAHA: Charles, when we look at the likes of the Dinson Iron and Steel Company that's set to do some wonders in Zimbabwe, and potentially the parent company behind that being a Chinese parent company that is the largest stainless steel or one of the largest stainless steel producers in the world, that poses a new set of challenges and a new set of threats because if we're still going to be importing, and now you've got a company that's looking to do 600 000 tons a year in steel production, that obviously means the likes of our local ArcelorMittal and other steel manufacturers here would have a difficult time.
Looking at the country's picture of wanting to industrialise and wanting to turn, in the president's [Cyril Ramaphosa] words, wanting to turn South Africa into a construction site, the steel sector is a critical part of those infrastructure development ambitions. How do we protect that sector so that after infrastructure development happens, we actually have a steel sector to come back to?
CHARLES DEDNAM: I think the biggest challenge for the steel sector at this point in time is to move away from commodities and actually to start adding value to the steel product itself.
If one looks at the Dinson steel mill, it's actually just filling the gap in the SADC [Southern African Development Community] region - and to a significant magnitude.
So although they're currently producing 600 000 tons, the end state will be about 3.5 million tons that they will be supplying into a current market that is about eight million tons in demand in SADC, with the South African productive capacity at 8.8 million tons. So it'll just add to surplus capacity in this region.
So the only way that you will actually be safeguarded against the commodity trade in the country is to focus on value-add, to do the more sophisticated product lines and to go further downstream in the production of steel.
JIMMY MOYAHA: This brings up the topic of beneficiation, and this is something we've long spoken about, whether you're looking at the steel sector or the gold sector or the platinum sector to say that in creating more opportunities in South Africa, we should be looking at beneficiation and looking at processing the raw materials that we have in South Africa, not simply exporting them.
Charles, when we look at that, how does that fit into expanding the steel sector, creating more jobs, creating more opportunities, going back to the days where we used to have factories and things that used to produce products in South Africa? Is this something that we can still get done in this day and age, especially with all the technological advances that are out there?
CHARLES DEDNAM: I really think so, Jimmy. When you look at the primary steel production side, you can actually produce as much as you like, but if you don't have the downstream to sell to, then [chuckle] you haven't got a market.
So you need to develop your downstream market in value addition.
Therefore, I agree 100% that we need to beneficiate as much as we can, going the furthest downstream that is possible to create the market that we are looking for.
That goes for the rest of Africa as well, not only for South Africa.
JIMMY MOYAHA: Charles, do you think that from a government perspective and from a policy perspective, offering protectionist concessions towards local manufacturers would encourage them as well to look at things differently and say, look, if we are creating new industries and we're creating new sectors of the economy, then as local players, we should be afforded the first rights to access these before the importers?
CHARLES DEDNAM: Yes, I think that is true and that is where the policy uncertainty is actually coming in.
I think South Africa is lacking a vision with regard to where they want to go with beneficiation and the steel industry. Once that is achieved, then all policies should be aligned to actually achieve that.
That is exactly what the Chinese have done. Also, if you look at all the developed nations in the world, Taiwan, and what Taiwan has done is that exact route where they actually aimed at the final product and then developed the best practice to achieve that.
I think that is the way that South Africa should also go.
JIMMY MOYAHA: The steel sector continues to wait on policy certainty to avoid an existential threat. Hopefully, someone out there is listening. Hopefully, we get this on the road, and we get it done because we can ill afford to lose more jobs in the economy that we have here.
We'll leave the conversation there. Charles, thanks so much for the insights and for the time. Charles Dednam, secretary general of the South African Iron and Steel Institute on the state of the steel industry, as well as the potential threat that could be coming from our northern borders.
JIMMY MOYAHA: There's a company in Zimbabwe called Dinson Iron and Steel Company; shortened, it says Disco. I didn't make up the abbreviation. The abbreviation is there, make of it what you will. They have finally gotten their production online earlier this year for one of their big plants that is a steel-producing plant in Zimbabwe.
Now, this is interesting because we as South Africa still import quite a bit of steel at an affordable rate, despite the fact that we have the likes of ArcelorMittal and an entire steel sector in South Africa. We're going to take a look at this. We're going to take a look at what these developments mean for the steel sector.
Joining me to take a look at this is the secretary general of the South African Iron and Steel Institute, Charles Dednam, to take a look at this and see if we can understand it. Good evening, Charles, thanks so much for taking the time.
These developments, obviously developments outside of our borders, nothing much we can really do about them, but I want to start by taking a look at the state of the South African steel sector. We're dealing with tariffs, we're dealing with duties, we're dealing with a scrap policy. There's a lot of confusion and back and forth and everything. What's happening at the moment?
CHARLES DEDNAM: Actually, at this point in time, a lot of uncertainty with regard to policy.
I think policy uncertainty is maybe one of the prime things that's hampering the steel industry at this stage.
Demand is very subdued. So we will be seeing about a 13% drop in demand, measured against last year and we will still be looking at about 30-plus percent imports of total steel demand, which is actually leaving quite a small amount for the local steel mills to supply into the local market.
JIMMY MOYAHA: Now Charles, part of the uncertainty that exists, from a policy perspective, is obviously that uncertainty that's aimed at protecting the sector. We had been hoping that the government would give us some policy certainty so that the local manufacturers can at least have some certainty around how much of the market they can actually supply.
If we don't have this uncertainty and we continue to see the demand come down, but we also continue to see the increase in the imports coming into South Africa, what does that do for the steel sector? Obviously, it's already under pressure, it can't really sit there and take much more of the pressure from all sides, can it?
CHARLES DEDNAM: Well, that's true, Jimmy, it's quite difficult for the local producers to stay afloat. I think it's coming from various sides.
So it's not only that the demand is falling back, it is also pressure on prices as the imported product is coming in at very competitive prices.
So, to actually stand your chance to supply the market, you have to be competitive in this particular market.
But with regard to the policy situation, I think although the perception is actually created that a lot of trade protection has already been afforded to the primary steel industry, but just looking at the result is that it hasn't had much effect on the imports and the volumes that are actually coming into the country.
So I think a lot can be done around the policy side as well.
JIMMY MOYAHA: Charles, when we look at the likes of the Dinson Iron and Steel Company that's set to do some wonders in Zimbabwe, and potentially the parent company behind that being a Chinese parent company that is the largest stainless steel or one of the largest stainless steel producers in the world, that poses a new set of challenges and a new set of threats because if we're still going to be importing, and now you've got a company that's looking to do 600 000 tons a year in steel production, that obviously means the likes of our local ArcelorMittal and other steel manufacturers here would have a difficult time.
Looking at the country's picture of wanting to industrialise and wanting to turn, in the president's [Cyril Ramaphosa] words, wanting to turn South Africa into a construction site, the steel sector is a critical part of those infrastructure development ambitions. How do we protect that sector so that after infrastructure development happens, we actually have a steel sector to come back to?
CHARLES DEDNAM: I think the biggest challenge for the steel sector at this point in time is to move away from commodities and actually to start adding value to the steel product itself.
If one looks at the Dinson steel mill, it's actually just filling the gap in the SADC [Southern African Development Community] region - and to a significant magnitude.
So although they're currently producing 600 000 tons, the end state will be about 3.5 million tons that they will be supplying into a current market that is about eight million tons in demand in SADC, with the South African productive capacity at 8.8 million tons. So it'll just add to surplus capacity in this region.
So the only way that you will actually be safeguarded against the commodity trade in the country is to focus on value-add, to do the more sophisticated product lines and to go further downstream in the production of steel.
JIMMY MOYAHA: This brings up the topic of beneficiation, and this is something we've long spoken about, whether you're looking at the steel sector or the gold sector or the platinum sector to say that in creating more opportunities in South Africa, we should be looking at beneficiation and looking at processing the raw materials that we have in South Africa, not simply exporting them.
Charles, when we look at that, how does that fit into expanding the steel sector, creating more jobs, creating more opportunities, going back to the days where we used to have factories and things that used to produce products in South Africa? Is this something that we can still get done in this day and age, especially with all the technological advances that are out there?
CHARLES DEDNAM: I really think so, Jimmy. When you look at the primary steel production side, you can actually produce as much as you like, but if you don't have the downstream to sell to, then [chuckle] you haven't got a market.
So you need to develop your downstream market in value addition.
Therefore, I agree 100% that we need to beneficiate as much as we can, going the furthest downstream that is possible to create the market that we are looking for.
That goes for the rest of Africa as well, not only for South Africa.
JIMMY MOYAHA: Charles, do you think that from a government perspective and from a policy perspective, offering protectionist concessions towards local manufacturers would encourage them as well to look at things differently and say, look, if we are creating new industries and we're creating new sectors of the economy, then as local players, we should be afforded the first rights to access these before the importers?
CHARLES DEDNAM: Yes, I think that is true and that is where the policy uncertainty is actually coming in.
I think South Africa is lacking a vision with regard to where they want to go with beneficiation and the steel industry. Once that is achieved, then all policies should be aligned to actually achieve that.
That is exactly what the Chinese have done. Also, if you look at all the developed nations in the world, Taiwan, and what Taiwan has done is that exact route where they actually aimed at the final product and then developed the best practice to achieve that.
I think that is the way that South Africa should also go.
JIMMY MOYAHA: The steel sector continues to wait on policy certainty to avoid an existential threat. Hopefully, someone out there is listening. Hopefully, we get this on the road, and we get it done because we can ill afford to lose more jobs in the economy that we have here.
We'll leave the conversation there. Charles, thanks so much for the insights and for the time. Charles Dednam, secretary general of the South African Iron and Steel Institute on the state of the steel industry, as well as the potential threat that could be coming from our northern borders.
Source - Moneyweb
