made here, but production has stopped for various reasons. Intervention is needed in order to match supply with demand - the primary steelmakers must be able to guarantee security and sustainability of supply and must match supply to the demand for the right kinds of steel at fair prices. A number of automotive and mining steel specifications are not produced. Production of these grades and finishes is essential for the expansion of the local industry in the automotive, mining and other areas. The auto industry has commenced discussions with steel manufacturers to manufacture the required types of steel locally. Local steel makers could over time produce at least some of the steels required by the auto, mining equipment, yellow metal, tube and pipe and other downstream industries. Most of these steels were made locally, but production was stopped as there were no economies of scale to sustain production. AMSA Vereeniging (previously USCO) made special steels. The mining equipment industry indicates, for example, that the mechanical strength of domestically-produced steel is good, but the finishing of certain products is not at the right specification and quality for their requirements. It is necessary for the dtic and the industry to support production capabilities to supply the more sophisticated steel market in SA (including infrastructure projects) and the lower end steel market in SA ( such as the informal housing market) through the effective regulation of standards and compulsory specifications for these applications. If the industry moves towards lower standards, it is likely that the majority of products will be imported, so that the domestic industry will be further weakened. 5.9 The remaining 50% of imports is made up mainly of hot rolled coil and galvanized steel from China and Russia. Russian steel is not covered by safeguards, but imports currently exceed the 3% threshold, which implies they should be considered for inclusion under the safeguard. 5.10 The excess capacity in South Africa in long steel products is in commodity long steel products. Long steel capacity, excluding the new capacity not yet commissioned, is 4.1 million tonnes; consumption in 2019 excluding imports was 1.9 million tonnes; surplus capacity is therefore about 2.2 million tonnes. The price of long steel is lower than the import price and is not sustainable. 5.11 An immediate area where policy has to be carefully navigated is between the advantages of primary steel production using ore and mini-mills using scrap metal as an input for the production of certain products. During the course of industry consultations, it has become apparent there are different views on the right mix between the two, and the impact that the newer steel mini-mills have on the sustainability of integrated steel production facilities. However, it is recognised that mini-mills contribute to economic inclusion by allowing access to the market by SMEs and black industrialists, and equally important, these mini steel mills enhance competition in particular regions or products. 5.12 It is important to look at the hot rolled and cold rolled value-added flat steel producers together (including Saldanha). The re-rollers consume about 1 million tons per year and the cold rolling facilities at Vanderbijlpark raise the overall available capacity of these products to at least 1.5 million tons. The plants could potentially supply the auto industry in South Africa. The supply uncertainties from AMSA have led to re-rollers requesting rebates from ITAC for imports to replace non-deliveries. Unless security of supply can be assured, rebates should be granted. 5.13 Over-capacity in the industry is a major problem, especially but not only in long steel products. The consolidation of the industry is urgent. The most significant imbalance between supply and demand is in long steel products because of the effect on price. The structural overcapacity of long steel products with prices which are extremely low in global terms means that all the plants are fighting for sales volumes to run their mills efficiently. Since profits are not possible through revenue, the focus is on cost reduction (including steelmakers using electric furnaces), but that has left many of the mills in a weak position financially. The industry should be allowed to discuss options, under supervision and with conditions. One option may be to consider the consolidation of products, rather than plants. It is proposed that the Minister designate the steel industry under Section 10 of the Competition Act as an industry in crisis, to enable discussion on consolidation of operations or products. This should be accompanied by appropriate measures to protect the industry from anti-competitive acts which would undermine the objectives of the Master Plan. The dtic should attend the discussions (and the industry agrees to this), which should exclude pricing issues. 5.14 The stainless steel industry has huge potential. Stainless steel is as important to the growth of the steel industry as carbon steel and has immense value-added potential and good international demand. Columbus Steel is a very successful producer of austenitic stainless steel. Columbus has the capacity to make 700 000 tons per year
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The South African Steel and Metal Fabrication Master Plan 1.0
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