“Nevertheless, the stainless-steel industry should certainly benefit from continued economic growth in South Africa and reconstruction initiatives such as Nepad in the rest of Africa,” Damm maintains.
He says that the fundamentals are right for South Africa to produce larger quantities of stainless steel, and reveals that there is room for further expansion in South Africa’s stainless-steel industry.
The fact that the South African stainless-steel market has been growing at double-digit rates in the last couple of years is indicative of this potential, Damm tells Engineering News in an exclusive interview.
The sudden recovery of the rand injured the industry in 2003, leading to lower exports and a significant increase in imports of raw materials and final products, and slowed overall market growth to only 1,4%.
Another factor contributing to this slower growth rate was the substantial decline in capital projects. With export margins under pressure due to the stronger rand manufacturers were forced to reconsider or postpone decisions on new or replacement plants, particularly in the mining and petrochemical industries.
Despite these challenges, South Africa still maintained manufacturing activity at the previous year’s levels and recorded domestic market growth of 4,5%, Damm enthuses.
“If we exclude China, this represents five times the average world growth rate and is more than on a par with market growth in the remainder of the Far East. The fact that the local industry has achieved this under very difficult circumstances shows the potential and is cause for optimism.” 2004 has again been a challenging year, with some gains in the automotive industry and difficulties in other export sectors.
Due to a number of large projects, such as the Spoornet rehabilitation of rail wagons and the Sasol Turbo project, Damm says more growth is expected this year.
Other encouraging projects are the World Cup 2010 and Gautrain, which hold many opportunities for the South African stainless-steel industry.
The use of stainless-steel in a great variety of applications is encouraged by its many benefits, such as long-term value, low maintenance costs, ease of fabrication, corrosion resistance, strength, hygiene and aesthetic appearance.
South Africa indicated 156 000 t of apparent consumption in 2003 (raw material and finished products imports) compared to the world market of some 15-million tons.
Damm says that the statistics for 2004 so far show solid domestic demand but there is still an acceler-ated import penetration with some lags on the export side.
“On the supply side, there has been a substantial growth due to the investment of Acerinox into Columbus Stainless which is increasing production from 450 000 t/y to more than 650 000 t/y, with further increases expected in the future,” he stresses.
This has led to a higher level of integration for South Africa into the primary industry, Damm explains.
Acerinox, the world’s third-largest producer, with plants in South Africa, Spain and North America, aims at producing a million tons in South Africa in the future.
“Global demand for stainless steel remains strong, and the average growth of stainless steel over the past 30 years parallels the growth of the plastics industry.
“Further, countries in the Far East like China and India are growing rapidly, with China indicating aggregate growth figures of 25% a year,” Damm reports.
He says that, with growth of that magnitude, it is no surprise that the country has implemented measures to curb investments and decrease the growth rate due to concerns about overheating and the various related financial and inflation pressures.
From a downstream development perspective, imports of raw material and finished goods remain highly competitive as the rand remains firm. In this regard, the South African government’s intention to negotiate preferential or free-trade agreements with India and China is particularly relevant. Damm stresses that industry and government both need to approach these issues with great circumspection to ensure that local manufacturing activities and employment are not compromised, but rather derive benefit from any such agreements.
Damm explains that, although much of the growth trajectory is driven by capital projects, good growth potential is also perceived in the consumer and architectural sectors.
“There are also significant opportunities in Africa, especially those linked to Nepad in sectors such as food and beverage; and industrial developments.” The main absorbers of stainless steel in South Africa remain the automotive, tube and pipe industries, vessels and process-flow equipment, and food and beverage industries.
Damm reports that the South African tank-container industry remains significant although it is facing very stiff competition from new production facilities in China.
Another challenge facing the South African industry is dumping.
“There are various remedial mechanisms in place such as counter- vailing and anti-dumping duties, but these are rather expensive and time-consuming to institute, which makes it difficult for smaller companies to access these measures,” Damm says.
Regarding the hype about the price of steel, Damm explains that the local price compares with that of the world market.
“Much of the cost pressure that has been experienced on stainless steel around the world has been related to strong demand from China and resultant increases in prices for chrome, nickel, molybdenum, and other raw materials,” he says.
Given the present global market conditions, he expects that stainless-steel prices are likely to remain firm for some time.
Damm maintains that, given South Africa’s large chrome resources and solid fundamentals, there is scope for expansion in the stainless-steel industry provided that it can secure the raw-material inputs at competitive prices, increase logistical efficiency and access competitively-priced energy.