South African steel production rose by 10.6% in 2023 to an estimated 4.9 million tons (Mt), according to the World Steel Association (worldsteel). The 2023 rise was despite the problems caused by load shedding and Transnet logistics challenges.
The 2023 rise was the first annual increase since 2017, but the 2023 total was still 32% below the 2014 total of 7.2 Mt. South Africa lost its crown as Africa’s largest steel producer to Egypt in 2017 and the gap between Egypt and South Africa has grown steadily since then. In 2023 Egypt produced 10.6 Mt, more than double South Africa’s production.
One of the reasons for the declining trend in South African steel production was the imposition of a 25% tariff by the US on steel imports and a 10% tariff on aluminium in early 2018.
The Department of Trade and Industry had made representations to the US to be exempted from the imposition of US tariffs, but these fell on deaf ears.
More than half the global production in 2023 came from China, which had only a 0.1% gain to 1 019.1 Mt. That meant that global steel production was almost unchanged at 1 888.2 Mt in 2023 from 1887.6 Mt in 2022.
South Africa was ranked 32nd on the list of global steel producers, just above the Netherlands, which had a 23.9% plunge to 4.7 Mt.
In its half year results to the end of June 2023, ArcelorMittal South Africa (Amsa), South Africa’s largest steel producer, reported a 29% jump in crude steel production to 1.4 Mt, while there was a 68% surge in export sales volumes to 230 000 tons.
On November 28, 2023, however, Amsa said it was looking to close down its longs production. Long steel products include such things as bars, rail, rod and wire as well as types of steel structural sections and girders. This closing down will affect the Newcastle Works and the Vereeniging Works with the possible loss of 3 500 jobs.
Amsa blamed the dire circumstances on South Africa's low economic growth, limited infrastructure spending, and project delays, which resulted in market overcapacity and overall weaker business confidence. In addition, high transport and logistics costs, as well as escalating energy prices, and intermittent electricity supply resulted in high costs and low capacity utilisation.
It also said the implementation of a preferential pricing system for scrap, a 20% export duty, and, more recently, a ban on scrap exports has given steel production using scrap via electric arc furnaces at mini mills an ‘artificial’ competitive advantage over steel manufacturers beneficiating iron ore to produce steel via blast furnaces.
The South African Downstream Steel Industry last week urgently appealed to both Amsa and the South African government to find solutions that would allow the continued operation of Amsa’s long steel business in South Africa.
The downstream operations are a critical part of the South African steel supply chain and currently provide 270 000 jobs.
Amsa’s 1.7 million tonnes per annum Newcastle blast furnace is currently the only local steel plant capable of producing long steel from iron ore. The long steel requirements of the formal downstream that only the Amsa mills can supply is equivalent to some 35% of current local demand or between 400 000 to 450 000 tons.
The unanimous agreement among the downstream steel associations is that the impact of the imminent Amsa plant closures would be devastating, not only for the local steel and manufacturing sectors, but for the entire country as jobs would be lost and imports would soar placing pressure on the rand exchange rate.
At the Crisis Summit, several industry associations said the resulting steel shortages from the closing down would possibly lead to the almost immediate production stoppages at many downstream plants over a wide range of dependent sub-industries and could even lead to the closure of industries that are completely reliant on the supply of long steel from Amsa.
Another expected consequence of the Amsa closure will be an increase in the imports of finished goods to replace locally manufactured goods, resulting in the further deindustrialisation of South Africa.
The manufacturing sector has shrunk from 18.0% of gross domestic product (GDP) in 2008 to only 11.3% of gross domestic product in 2022.