While it remains uncertain whether ArcelorMittal SA (Amsa) will receive a R1bn bailout, the domestic steel industry faces mounting challenges. If Amsa shuts down permanently it is unlikely that Transnet Port Terminals (TPT) can compensate for the loss of locally produced long steel with an immediate increase in break-bulk steel imports.
SA largely manufactures its own long steel, which is essential for construction, manufacturing and infrastructure projects. However, if Amsa’s Newcastle and Vereeniging plants close the industry will be forced to rely more heavily on imports.
Given Transnet’s staggering debt (exceeding R130bn) and ongoing operational challenges, it is unlikely that TPT will be able to ramp up steel imports in the short term. Even though Transnet is negotiating private sector partnerships at Durban container terminal 2 and Richards Bay, the infrastructure expansion and maintenance required to boost operational capacity will take at least two to five years.
If the construction, manufacturing and infrastructure sectors are to depend on imported long steel, they face a high probability of supply shortages in the short term.
Carika Middelburg
Centre for Risk Analysis
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