In a recent discussion with Railways Africa Magazine, Gaurav Nagpal, Chief Marketing Officer of ArcelorMittal South Africa, shed light on the company’s journey over nearly a century of steel manufacturing. The focus was on the challenges faced by the Long Steel business and the strategic steps being taken to ensure the sustainability of local production, especially for critical railway products. These products are essential for bolstering African railway infrastructure as part of the African Continental Free Trade Area initiatives.
The Long Steel division has encountered numerous obstacles, including fluctuating local demand and operational challenges linked to state-owned companies Eskom and Transnet. These factors prompted ArcelorMittal to consider winding down this division in late 2023. However, after a detailed reassessment in early 2024, the company recognized viable paths forward, ultimately deciding to continue its operations. This turnaround illustrates the importance of local steel manufacturing for South Africa's economy, as highlighted by various studies demonstrating its impact on jobs and the industrial sector.
Key initiatives were introduced to address the challenges faced. The lifting of the export ban on steel scrap was significant, fostering a more equitable cost structure between integrated steel producers and those reliant on scrap. Additionally, ArcelorMittal South Africa has engaged in negotiations with Transnet to enhance port and rail efficiency. Such improvements are crucial, given the reliance on these infrastructures for the transportation of materials essential to steel production and railway construction.
On the international trade front, South Africa is implementing protective measures to create a level playing field for its manufacturers. A provisional safeguard duty of 9% was instituted on certain hot-rolled steel products, reflecting a proactive approach to counteract oversupply and unfair competition in the global market. Nagpal emphasized the necessity of these measures to protect local industries from sudden surges in imports, especially from countries like China, which have ramped up steel production.
The rail sector holds particular significance for ArcelorMittal South Africa. The company has played a pivotal role in the localization of steel products, taking over the Highveld Structural Mill to produce mainline rails and structural sections domestically. This acquisition marked a critical shift, allowing the company to localize 80,000 metric tons of previously imported steel, which is valued at approximately R1.2 billion. This move not only boosts local manufacturing but also positions South Africa as a potential hub for regional railway infrastructure development under the AfCFTA framework.
Furthermore, the company's extensive product range supports various rail projects across the continent, including mining rails, railway sleepers, and structural steel for overhead lines. Nagpal noted that ArcelorMittal's products have been integral to significant infrastructure projects, both in South Africa and internationally, showcasing the company's long-standing reputation for quality.
South Africa’s economic landscape presents unique opportunities for the steel industry, particularly in the context of the AfCFTA. With about 100,000 kilometers of railway track across Africa, including 25,000 kilometers within South Africa, there is a significant demand for quality rail products. Nagpal envisions South Africa becoming a central hub for rail manufacturing, highlighting the importance of government partnership and policy support to realize this ambition.
Trade dynamics globally also play a crucial role in shaping ArcelorMittal’s strategy. Nagpal pointed out the need for safeguards against unfair trade practices, particularly given the substantial steel exports from China, which reached a historic high in 2023. The rise in global steel exports can destabilize local markets, making protective measures vital for sustaining domestic industries.
