[miningmx.com] – THE Industrial Development Corporation (IDC) would press ahead with construction of a $5bn steel mill because the country did not want to be caught napping when the steel sector recovers, said Geoffrey Qhena, CEO of the state-owned development bank.
Speaking to the parliamentary oversight committee on economic development on Tuesday, Qhena said the proposed steel plant was a long-term project.
“We are taking into account what’s happening in the steel industry, but we also don’t want to be caught in a situation where we don’t do anything while the steel industry is recovering. Because we know it will recover,” he said. The plant would be built in joint venture with Hebei, the Chinese state-owned steelmaker.
Qhena said new technology would be used when constructing a new steel plant. “The ones we have date back to the 1950s and there are environmental issues. We’re not taking these decisions lightly,” he said.
He also believed South Africa wouldn’t struggle to find a market for its steel, as there are tremendous infrastructure investment in Africa for which steel is needed.
Michael Cardo, a spokesperson for economic development for opposition party, the Democratic Alliance said the IDC should abandon its “high-risk” plans.
“It flies in the face of all common sense, especially since Arcelor Mittal South Africa’s (AMSA’s) warning of a ‘bloodbath year’ for the steel industry.”
Qhena said although the IDC hasn’t decided on a specific site it will most likely be in Mpumalanga or Richards Bay and is expected to produce up to five million tonnes of steel a year.
Economic development minister Ebrahim Patel said in September the plans for a steel plant hinges on a feasibility study, but Abel Malinga, the IDC’s head of mining and metals, contradicted him some weeks later, saying: “We are going ahead with it. We are not going to change our minds”.
The DA’s Cardo, however, is of the view that the project will be an expensive failure.
“There is currently an overabundance of the kind of steel South Africa needs for infrastructure development, while our trading partners already have large steel plants which negates the potential for export benefits,” he said.
Steps to impose tariffs on imported steel have come too late for ArcelorMittal South Africa’s AMSA’s) Vereeniging Works following a review of the historic mill’s long-steel business which will result in the loss of 400 jobs.
AMSA said in August that the long-steel business at Vereeniging, founded in 1911, would be merged with the Newcastle business in an effort to stave off the effects of low steel prices and the impact of cheap imports on the company’s domestic business. It added that it had extended its business review to its Vanderbijlpark Works.
AMSA CEO, Paul O’Flaherty, has made much of the need for price protection from cheap, predominantly Chinese, imports adding that some 200,000 jobs were at risk in South Africa’s steel making sector.
