Steel industry experts express concerns over ‘volatile and inflated’ steel prices
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Steel industry experts say steel has become over-inflated and volatile as a raw material.
In a recent webinar facilitated by 20 Vision, three industry businessmen voiced their discontent over steel prices.
Steel has seen a 145 percent increase in prices in a period of five years. In the past four months, they have surged by 42 percent. CEO of Fabricon Selwin Swart said this had made the product risky to work with compared to 20 years ago when costs were stable.
“It’s a very different landscape from when we had competitive steel prices, competitive companies that operated. Steel was not anywhere near your biggest risk item in a project. It was readily available.
“What we have seen in the past five years and more so in the past 12 months is that steel has become the biggest risk item. Prices are only valid for five days. When you used to manage the risk in a tender, steel was never on the cards; now steel is the top risk we have been experiencing,” said Swart.
General manager of Tseba Tanks and Steel Structures Msekeli Mpapama said steel price increases have changed the landscape of the industry in terms of competitiveness of companies.
“If you look at a market that is already highly competitive, but your core raw material is expensive and increases your input costs drastically; it really impacts your business and it’s either you absorb that cost or you transfer it to your clients. And in doing so, you lose your competitiveness in the market,” said Mpapama.
“The price of steel has impacted our business, our cash flow, and profitability. We’ve had to find innovative ways to stay relevant and stay competitive,” said Mpapama.
Market manager of Sandock Austrial Shipyards Charles Maher said the industry was stuck in a vicious cycle where they must rely on one supplier within southern Africa. “The steel price is extremely sensitive here in terms of how it’s measured against other steel ship repairs around the world.
Maher said the 18 percent import tariff on top of over-inflated local steel prices pushes the business’s competitiveness in the market.
“We are looking at options for importing steel, but it’s very capital-intensive. It will require a lot for a company like ours to be able to import steel,” said Mpapama.
Swart said the industry needed government intervention in order to recover. “We need government support in terms of getting us into the global market and landing steel at the right place and time.”
BUSINESS REPORT ONLINE