Johannesburg – South Africa’s struggling steel industry finds itself at a critical juncture, with experts advocating for a laser-sharp focus on downstream manufacturing within the machinery, automotive, and construction sectors to maximise the developmental impact of localisation efforts. This strategic shift comes as the nation’s crude steel production grapples with a deepening structural crisis, casting a long shadow over the future of a sector deemed essential despite its limited direct contribution to GDP.
The stark warning emerged from a recent webinar hosted by Trade and Industrial Policy Strategies (TIPS), where senior economist Dr Neva Makgetla painted a grim picture of an industry buffeted by stagnant domestic and export demand, coupled with spiralling costs at ArcelorMittal South Africa (AMSA). AMSA, the country’s sole integrated steel producer, has seen its local sales plummet, recording losses in seven of the past 12 years and consequently writing off significant assets.
These domestic pressures are compounded by a flood of cheaper imports, particularly from China, which benefits from more favourable access to critical raw materials like iron-ore and coking coal. Dr Makgetla further highlighted a global trend towards lighter materials and digital technologies, which has incrementally reduced the “steel intensity” of South Africa’s GDP, adding another layer of complexity to the industry’s woes.
While acknowledging the recent increases in export parity prices for iron-ore, coal, and basic steel, which further squeeze local producers, Dr Makgetla argued that the economic justification for direct government support of crude steel production is tenuous. Instead, she posited a compelling case for robust backing of downstream, steel-based manufacturers – particularly those churning out inputs for crucial sectors like machinery, vehicles, and construction.
Despite its modest direct contributions to employment, GDP, and exports, the steel industry remains a linchpin for public infrastructure development and the vitality of advanced manufacturing sectors, a point on which panellists, including International Trade Administration Commission of South Africa chief commissioner Ayabonga Cawe and Cape Gate Mill chairperson Oren Kaplan, wholeheartedly agreed.
The consensus from the expert panel was clear: strategic decisions and tough trade-offs are unavoidable if the domestic steel industry is to stabilise and grow within a fiercely competitive global market.
Notably, Oren Kaplan pointed a finger directly at AMSA’s ongoing struggles, describing them as “haunting” the entire steel industry. He stressed the urgent need for “good solutions instead of bailouts,” signalling a clear call for sustainable, long-term strategies over short-term financial injections that have historically done little to address the sector’s foundational issues.
As South Africa navigates this turbulent economic landscape, the future of its steel industry hinges on a pragmatic shift towards supporting its value-added segments, a move experts believe is critical to forging a more resilient and impactful future for local manufacturing.
