Steel, one of the most important parts in manufacturing and infrastructural development in the country has been experiencing price hikes recently. Photo: REUTERS/Fabian Bimmer
Steel, one of the most important parts in manufacturing and infrastructural development in the country has been experiencing price hikes recently. Photo: REUTERS/Fabian Bimmer

Steel price hikes can be attributed to global steel shortage and Covid-19

By BR Reporter Time of article published Nov 16, 2021

Share this article:

Steel, one of the most important parts in manufacturing and infrastructural development in the country has been experiencing price hikes recently.

According to industry experts, the hikes have been more than 145 percent in just five years.

Steel storage tank manufacturer Tseba Tanks general manager Msekeli Mpapama described the steel price hikes as dire but not beyond fixing.

“The steel industry price increases can be attributed to several factors, including a global steel shortage, the downturn in the global economy, the sustainability of the steel industry and Covid-19 effects,” said Mpapama.

To add to the burden, high labour costs with low productivity levels and a lack of investment in research and development have further stifled the South African industry.

“In an already highly competitive market, these price increases are exacerbating the situation and exerting more pressure in terms of firms maintaining their competitiveness in the market,” said Mpapama.

Most companies have been negatively impacted by these price increases and some have had to shut their doors because it proved unprofitable to absorb these price increases or transfer them to their customers

Selwin Swartz, CEO of Fabricon, a Steel Fabrication business in KwaZulu-Natal, said that the exorbitant steel price means clients do fewer projects due to the rise in costs driven by material prices and the uncertainty of price validity.

Swartz proposes that there needs to be a concerted effort to stabilise pricing agreements with countries like Asia and Europe.

“There also need to be trade agreements with shipping lines in order to hold prices and prioritise steel shipments,” he added.

Mpapama said government and other industry stakeholders must fast-track the implementation of the South African Steel and Metal Fabrication Master Plan 1.0 to remedy the issue.

“The master plan focuses on the short-term survival of the industry and builds on the on-going support measures for the longer-term growth and sustainability of the industry. The master plan is intended to create long-term policy certainty for the industry,” Mpapama said.

Economist Dawie Roodt said that like for other industries, the answer to the woes of the steel industry may be unintuitive.

“Instead of trying to protect the industry with new measures and import duties, the best ’protection’ for any industry is to remove obstacles, including issues like minimum wages, a shortage of electricity and lack of property skilled workers,” Roodt said.

BUSINESS REPORT ONLINE

Share this article: