In this second part of a two-part article, the Hot Dip Galvanisers Association Southern Africa (HDGASA) reports the sector is now poised to benefit from opportunities generated by localisation and beneficiation initiatives.
Infrastructural inconsistencies
Inconsistencies in implementation of strategic initiations such as designation and local content stimulation to foster investment and job creation are also problematic.
A decision by the South African National Roads Agency (SANRAL) to award tenders to construct highway bridges worth billions to a Chinese company was just one disappointment, the executive director of the Hot Dip Galvanisers Association Southern Africa (HDGASA) Robin Clarke says. This has subsequently been withdrawn and re-advertised, and Clarke is optimistic that local companies could now benefit.
He also cites Eskom’s Transmission Development Plan (TDP), which promises the construction of some 14 000kms of transmission lines which are needed to balance the electricity grid, as an opportunity for the steel sector. However, pricing issues and a potential lack of access to steel because of the ArcelorMittal long products facilities closures, represents a significant risk for such projects.
“It is essential that a default position to import finished products to service these projects is guarded against. History has shown that we have the capacity and skills to service such infrastructure projects, and to do so will prevent further erosion of local investments and increased unemployment.
There is a potential for placing our industry under increased pressure through irresponsible imports. We need to do everything we can to try to stop this from happening,” he emphasises.
Galvanised steel. Image by evening_tao on Freepik
A positive alternative
An alternative and very much more positive solution for potential steel shortages of critical steel sections would be for government to allow the import of quality, raw steel for beneficiation locally. Provided that standards are met, this would not only meet the needs of large local infrastructure projects, but also make local fabricators more competitive across all sub-Saharan markets.
The increase in production volumes that are closely aligned with this could result in efficiencies that would, in turn, achieve more competitive pricing. “This is the ultimate high road. Vertical integration is also required for success. If we have this – combined with the right volumes in any steel fabrication and/or galvanising shop, as well as a stringent and enforceable quality assurance system – then the steel and galvanising sectors have a viable operational framework which creates profitability for the entire value chain,” Clarke maintains.
‘Galvanising’ job creation via volume
At present, Clarke estimates that approximately 2 200 people are directly employed in the galvanising sector, with a further 1 500 working for companies which support it. It is however estimated that present market conditions only result in a utilisation of approximately 45% of total installed capacity. Therefore, employment could be doubled within the galvanising sector if sufficient volumes were available for companies to add more shifts.
“We still have the capacity, which could be turned on at minimal investment. Yes, our surviving businesses are operating off a higher cost base, but they are also very experienced, good businesses – with the capability and expertise to ‘step up to the plate’. What we really need is a structured increase in volumes over a short period of time,” he says.
Building bridges for the future
Going forward, Clarke believes a number of opportunities could flow from policymakers’ support for local manufacturing and beneficiation. As an example, the SANRAL (South African National Road Agency Limited) coastal bridge programme, which would include the use of galvanised steel rebar as specified by civil engineers. This technology is proven to be beneficial and is a cost-effective method of adding service life to concrete structures – particularly in coastal environments.
“We really hope that SANRAL does the right thing, as this would liberate thousands of tons for the industry and provide a massive boost for local content – including local employment across the fabrication, construction and galvanising sectors,” he says.
A resurgence in Transnet’s infrastructure investments would also provide a further boost to vital volumes across the sector – as would opportunities to take advantage of the trend of corrosion control for pivotal construction components such as nuts and bolts.
Another area of opportunity is renewable energy. “This is gaining traction in South Africa and will run in parallel as a volume multiplier in our industry. It is a tremendous opportunity but needs to be done with a very serious understanding of the sector and its attendant requirements, challenges and risks – and with excellent contracting capacity. Some of our galvanisers are already participating in this arena, and it is pleasing to note that their volumes are increasing, assisting with overhead recovery and ultimately, a return to profitability for the sector,” he concludes.
Source
HDGASA
