Aug

Steel pricing plays havoc

2010-08-25 16:12
A huge loader loads iron ore onto a haul truck at Sishen Mine. The recent dispute between ArcelorMittal and Khumba Iron Ore brought to a head the sorry state of steel pricing in this country which is adversely affecting all industries, including trucking.

There has a lot of debate over the price of locally manufactured steel of late with the Department of Trade and Industry declaring it is “extremely concerned’ over the high cost of steel in South Africa which it claims is among the highest in the world.Needless to say, this has had a negative impact on the local trailer building industry. Rui da Silva, MD of Bloemfontein-based Trailord, says the cost of steel increases on an almost monthly basis. “By the time you have finished building one trailer, the second one will cost you more,’ he comments.

Da Silva goes on to say: “While you can buy steel cheaper on the international market, the smaller manufacturers do not have the financial muscle to bring it in.’

Moses Naidoo, marketing manager at Henred Fruehauf, says every trailer manufacturer in South Africa is affected to some degree or other. “One has to extremely careful when planning steel purchases,’ he observes.

Charles Lovell, marketing director for the Johannesburg-based Kearney Group, concurs: “Steel is a sensitive issue,’ he comments. “If you have the money, you can buy ahead and possibly avoid sudden price increases but this also carries some risk as well as tying up valuable capex.’

Afrit’s marketing manager, Leon van der Wetering, says the current instability in the future supply as well as the extremely high and fluctuating cost of South African steel has had quite an effect on the country’s trailer manufacturing industry.

“In many instances, we have been forced to absorb sudden price hikes as we have quoted or tendered for a particular contract and then all of a sudden there is another price increase.

“We try plan ahead by purchasing a lot of steel in advance but this is difficult in the ever changing market and it also means you have to have a lot of liquidity on hand.’

There may be some relief for Afrit and all the other trailer builders around the country with the recent announcement that the Departments of Trade and Industry (DTI) and Economic Development and Mineral Resources, have formed a task team to oversee the viability and cost-competitiveness of the South African steel industry.

The high cost of locally produced steel has been a sticking point in South Africa’s aspirations for sustained industrial expansion and global competitiveness for many years. It was brought to a head with the dispute between ArcelorMittal South Africa and  Kumba Iron Ore (KIO) over iron-ore supply and prices.

The DTI says the ultimate aim of the task team is to ensure South Africa puts a competitive steel-pricing regime in place to support the development of value-added manufactured products in downstream industries.

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