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South Africa's steel industry has mobilised in an attempt to find solutions for the many challenges facing it. One of these is the electricity price increases proposed by Eskom. The Steel and Engineering Industries Federation of South Africa (Seifsa) told the National Energy Regulator of South Africa (Nersa) that the electricity price was a significant contributor to the total input costs basket of the metals and engineering cluster, and that frequent increases in electricity prices were not sustainable for businesses. 

“Apart from transport costs, which are often exacerbated by energy costs, coal and energy costs represent up to 42% of the production costs of some large companies in the steel industry. Therefore, it is very important that electricity price increases are contained in order to reduce overall production costs, which may ultimately lead to more losses and closure of strategic industries,” Seifsa economist Marique Kruger told Nersa.

With these kinds of challenges in mind, the South African Institute of Steel Construction (SAISC) held an industry mobilisation meeting with decision-makers, members, and other associations in the sector in order to “co-ordinate to find actionable solutions to the current challenging industry environment”. The meeting resulted in the formation of the CEO Task Force. The CEO Task Force will gather the leadership of steel suppliers and manufacturers in order to lobby and mobilise key stakeholders to gain co-operation concerning protective tariffs.

SA steel industry mobilises for co operative improvementSpeaking at the meeting, Allied Steelrode’s Executive Director Warne Rippon said that he is hoping for greater transparency in the relationship between the primary producer and the downstream market.

“From an Allied Steelrode perspective, we trust that this meeting will prove to be an effective catalyst for members of South Africa's steel industry to collaborate in order to mobilise for positive industry change; and for the growth and sustainability of the steel industry in the future, for the benefit of all concerned,” he said. 

Rippon added that are major opportunities in the local steel industry at present. However, foresight and courage are needed to make the substantial capital investments required for advancement, he believes. He also raised the issue of pricing, the volatility of which “poses a very urgent challenge to the entire sector”. According to him, effective procurement – a key part of any business – is severely handicapped.

“Price volatility from the primary supplier tends to have an adverse effect on the leading steel industry suppliers and even more so on their downstream customers. If there isn’t some rationalisation of pricing levels, many in the industry will be in forced to import more of their steel requirements. There is an urgent need for viable solutions to ensure the long-term sustainability of the industry,” Rippon said.

He suggested a more stable, reality-based pricing system which would include a review of the 10% import duty price protection and the scrapping of the added 12% safeguard duty. Rippon also called for the primary steel producer to reintroduce volumetric tonnage discounts and to restore the advantage of bulk procurement. 

Image credit: http://alliedsteelrode.com/category/press-release/

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