SA battles reinforcing steel shortage

This comes as the beleaguered construction industry - whose civils side contracted 40% last year while construction suffered the worst slump in decades - also has to deal with an ongoing bitumen shortage.

Reinforcing steel is a critical element in practically all civil construction and building projects.

Rob Mountford, a director of the South African Reinforced Concrete Engineers' Association (Sarcea), said the shortage had arisen following the recent closure of Murray & Roberts Holdings Cisco plant in the Western Cape, which had supplied 25% of the market.

The situation was aggravated by the closure of Mittal’s Newcastle plant for maintenance for several weeks at the beginning of the year, said Mountford.

There are currently three main suppliers of reinforcing steel to the South African market, namely Mittal (Newcastle), Cape Gate’s Davsteel (Afr says Dove Steel, but Davsteel correct) in the Vaal Triangle and Score Metals in Germiston.

These companies supply coil and reinforcing bar steel to Sarcea members, who bend and mould it according to specification for projects.

This processed reinforcing steel can currently not be delivered by the agreed-upon dates.

In the 12 months to end-March Sarcea’s members apparently used 180 000 tonnes of reinforcing steel, almost half the 350 000 tonnes two years ago.

According to Mountford, Sarcea members make up 60% to 70% of the entire market.

The three big suppliers have now begun to limit supplies to clients and grant each only a certain quota – so no-one is entirely without reinforcing steel.

Mountford says the only alternative is to import. But this takes two to three months and requires considerable capital outlay, putting it outside the reach of smaller contractors.

Murray & Roberts spokesperson Ed Jardim said the group could no longer operate Cisco profitably and was now importing reinforcing steel more cheaply.

John Wallace, executive director for manufacturing and construction materials at Group Five, said it was a struggle to get sufficient reinforcing steel and the huge demand relative to supply had driven up prices.

Group Five imports from Eastern Europe, but the big problem is the six to eight weeks that it takes to get it to site.

He said the imported steel is cheaper than the local product when it lands at the coast, but transport costs to the interior make it the same price.

Orders are placed based on a credit guarantee and therefore a company's credit facilities are used up for the entire period the delivery takes.

Certain grades of reinforcing steel, according to Wallace, are available nowhere in South Africa. In such instances force majeure is declared.

This means that circumstances outside the control of the contractor oblige the client to bear the costs.

But this of course depends on the quality of your contract, Wallace noted.