SA’s biggest steel manufacturer, ArcelorMittal SA, appears to be going ahead with its threats to shut up its long products shop, but the Eastern Cape's top supplier says he has his loyal clients covered.
“The threats to close have been rumbling for a long time and, as they are the biggest local supplier of long steel we have to take the warning seriously,” said Gareth Hewitt yesterday.
As MD of Steel & Pipes for Africa in the Eastern Cape (East London, Mthatha and Komani branches) -- as well as of SPA's sister company, Buffalo City Steel, Hewitt has been buying up steel ever since rumours of Amsa's troubles started circulating last year, to ensure that his local customers are not caught short.
Because of its high tensile strength and low cost, steel is one of the most commonly manufactured materials in the world.
Steel is used in buildings, as concrete reinforcing rods, in bridges, infrastructure, tools, ships, trains, cars, bicycles, machines, electrical appliances, furniture, and weapons.
What makes it crucial in housing and construction is that steel rebar binds well with concrete, so it is the basis of load-bearing structures, scaffolding, foundations and dams.
The engineering industry uses it to make machine parts, tools, and mechanical components.
Products termed “longs” include wire, rods, rail, and bars as well as types of steel structural sections and girders.
With Amsa supplying most of these from its long products division, Hewitt is expecting a flurry of panic buying across the board.
“There could well be a shortage of large steel beams, and that will have a huge impact on the construction industry.
"It may not become a major crisis for January and February but as Amsa winds down its stock levels and does not replace, shortages will bite.”
A knock-on impact will be that longs sales companies will at first see an uptick as customers panic-buy.
As the smaller steel mills struggle to meet the demand that Amsa has historically supplied, there will be a shortage, and every “stock out” will increase the price.
“Nationwide, Steel & Pipes customers will probably be among the least affected because we have a large stock holding and nearly 20 branches throughout SA.
"In the short term stocks will get bigger as we increase our buying, which started when Amsa announced that it would halt manufacturing, coupled with its announcement that its closure will have a “profound effect on local economies.”
Amsa has warned that up to 3,500 direct and indirect jobs may be affected, starting when production ends in late January.
Its plants in Newcastle and Vereeniging, as well as its rail and structures subsidiary in eMalahleni, Amras, will close at the end of March.
Amsa CEO Kobus Verster is reported to have said that the group was disappointed that its efforts, over the past year, to “level the playing field against international and local competitors”, failed to translate into a sustainable solution.
As Amsa proceeds with the winding down process, the longs business will now be placed into care and maintenance, subject to a consultation process.
Today the world's second largest steel producer, producing 78 million metric tonnes of crude steel annually, ArcelorMittal SA has been in existence since 1928 when the company, then called Iscor, with its first works in Pretoria, was founded as a statutory parastatal organisation.
In June 2006 a historic agreement was reached to combine Mittal Steel and Arcelor in a merger of equals, creating the world’s largest steel company.
The combined group, domiciled and headquartered in Luxembourg, was named ArcelorMittal.
By December 2011, the Competition Commission was formally investigating five complaints against Amsa, including one of price fixing in the flat steel market, one of excessive pricing of tinplate and one of prohibited vertical practices in respect of scrap steel purchases.
In 2016, the Commission and Amsa reached a settlement that resolved all pending investigations and prosecutions.
Amsa admitted to being involved in cartels for long steel and scrap metal, and agreed to pay a R1.5bn administrative penalty.
It also agreed to remedies related to pricing complaints, but did not admit to breaking the Competition Act.
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