R29.95

November 2011

CONTENTSnovember 2011

November 2011 1

REGULARS

ADVE

RTS

PROFILES

FOCUS ON

3 Perspective A message from the editor24 Sassdas Import Levy Stainless Steel Magazine discusses the levy with Gary Crawford26 From the Technical Desk Technical advisor Ken Dewar discusses stainless steel27 Industry News News and events from companies in the industry29 Sassda News News and events from the association32 Personality Prole We talk to Fabrinoxs managing director Andr Visser

16 Stalcor The stainless steel stockist has a new face BoltfastColumbus StainlessFabrinoxGeneral Proling Macsteel VRNMetso NDRimex MetalsStalcor

4

10

14

20

Manufacturing South Africa faces de-industrialisation unless

drastic measures are taken to curb the trend

Domestic Market The latest apparent consumption gures show that

stainless steel growth is recovering from the recession

Power Stations Eskoms Medupi and Kusile power station are

using signicant amounts of stainless steel to be built

Catalytic Converters The R22 billion industry faces a massive threat

unless steps are taken to prevent it

PERSPECTIVEnovember 2011

November 2011 3

CONTACT USPublisher Maverick MarketingEditor Melissa Rowlston Tel: 011 483 0941 melissa@stainlesssteelmagazine.co.zaSales Hermy Ballinger hermy@stainlesssteelmagazine.co.zaPhotographs Werner Prinsloo werner@nineteen86.co.za Shutterstock Gallo ImagesContributors Tom Robbins tomrobbins@mweb.co.za

Printers Goldelds Press Tel: 011 627 7740 Fax: 011 627 7741

Letters, comments and subscription requests to melissa@stainlesssteelmagazine.co.za

SASSDATel: 011 883 0119 Fax: 011 883 0183

e-mail: info@sassda.co.zawww.sassda.co.za

Stainless Steel is published quarterly and is distributed to stockists, distributors, fabricators, speciers, consulting engineers, architects, mining, petrochemical and chemical industries, food

beverage and pharmaceutical industries, consumer outlets, end-users, educational institutes and provincial and government departments. Maverick Marketing makes every effort to ensure the accuracy of the contents of its publications, but no warranty is made as to such accuracy, and no responsibility will be borne by the publisher or Sassda for the consequences of any actions

based on information so published. All opinions, views and expressions contained in this publication

are not necessarily those of the management of Sassda. The contents of this publication enjoy positive protection under the Copyright Act and therefore copyright thereof is expressly reserved. Any copying,publication and distribution of part or

whole of the publication is prohibited unless consent is granted by Sassda.

As 2011 draws to an end, the situation for local manufacturing looks dire. The rand, the power situation and the lack of an im-mediate proactive response from government to save industries in peril are taking their toll.

Read our lead article on the potential de-industrialisation of South Africa on page 4 for an industry take. Our catalytic converter article on page 21 is a case in point. The R22 billion industry faces relocation to Europe unless the local interest groups and government step in and make dramatic steps to save it.

On page 10, we examine the latest local statistics from the stain-less steel industry for an understanding of the potential for localisation and the pitfalls facing the industry.

The recent announcement by Eskom chief executive Brian Dames about the possibility of a further delay at Medupi because of problems with Hitachi, which has the contract to build and install the boilers at the station, does not look good for the power situation. Read our article on page 14 on how the stainless steel industry is playing its part in building the Medupi and Kusile stations.

The delay in supplying new power will have a further knock-on effect to the slow-down in the South African economy. Further delays in supplying power could result in companies either shelving or delaying projects they were trying to get off the ground or moving them to other locations where power is available.

This is particularly evident with the relocation of Tharisa Minerals relocation of its ferrochrome smelter at Rustenburg to China because Eskom can only supply the required 300MW to 400MW of power by about 2018.

Xstrata and Merafe Resources ferrochrome smelter is also in peril due to the power limitations. Read our lead article to see the po-tential for South Africa in terms of ferrochrome and PGM beneciation.

However, it is not all doom and gloom, Stalcor, the old KMG, has been revitalised and reinvented itself with a total facelift. Read our cover article on page 16.

Have a great break over the festive season and Stainless Steel Magazine will be back in early March 2012.

Manufacturing is in peril, which will have a massive effect on many unskilled workers who rely on the industry to make a living

focus onMANUFACTURING

November 2011 5

The government is intervening in the manufacturing industry to throw struggling factories a lifeline in the hope that the temporary boost will foster long-term sustainability in the sector.

In the relatively recent past there was disquiet over the weakening South African manufacturing sector but with job losses now totalling 300000 since the early 1990s no participants are using such polite language anymore.

In December the department of trade and industry (dti) will give details of initial minimum local procurement quota regulations for government depart-ments and state-owned enterprises, particularly those tasked with the countrys approximately R800 billion public infrastructure spend. Areas will include rail, buses, Eskom power stations, pharmaceuticals and clothing. More will follow.

Manufacturing Circle, a lobby group representing many of the large local manufacturers, has provided the most persuasive argument in favour of quotas but there are many economists who feel this will cost too much and do nothing to build a viable industry in the long-term.

Manufacturing Circle chairperson Stewart Jennings says the biggest problem in the sector is that manufacturing volumes are too small for products to be cheaper. Long-term government intervention can help foster the econo-mies of scale that will allow the sector to be competitive, Jennings says.

The government move, which began with the generic announcement of stronger industrial policies last year, marks a policy shift for a govern-ment that meaningfully reduced trade barriers, albeit through reducing import tariffs. This after the country was welcomed back into the world economy in 1994 following years of sanctions. But pressure from manufacturers and trade unions, and no doubt government concern about muted short-term tax collection from struggling manufacturers, has resulted in the move away from the free market.

It could also potentially open the political space for more dramatic protectionist trade moves such as increasing import tariffs.

Earlier in the year state-owned Transnet committed to assembling 90 out of 100 new General Electric locomotives in the country, publicly endorsed by President Jacob Zuma in October. But the components will be imported, illustrating that apart from some sectors, such as the motor industry, original equipment manufacturing is limited here.

The policy modication comes after South Africa has been one of only a few emerging market countries where manufacturing has yet to recover after the global recession of 2009, mirroring the performance of factories in most developed countries.

State intervenesto try stop de-industrialisation

The dti is launching PROCUREMENT REGULATIONS to help prop up the ailing manufacturing sector, but many feel that despite

a crucial need, it may be too little, too late

The government is keen to avoid a repetition of the disaster of its interven-tion in the clothing and textile sector of 2007 where quotas on clothing and tex-tiles hurt most of the very producers the policy aimed to help. Import quotas on textiles not manufactured in the country meant the clothing makers struggled to produce some lines of clothing without the raw material. Indeed the industry as-sociation did not support the move.

But the dti promises more meas-ured and thought-out regulations, which will only be implemented in sectors where locals stand a chance of compet-ing. It is adamant the intervention will not take place among the more uncom-petitive sub-sectors, thus avoiding short-ages radically driving up the cost of new power stations and rail infrastructure.

Factories will also have to agree to con-ditions, such as productivity gains, in or-der to benet.

Nevertheless, questions remain as to whether the policy can be anything more than short-term; a stop-gap to avoid factory closures and retrenchments.

Merina Willemse, an economist at the Efcient Group, says traditional manufacturers that are not succeeding should be allowed to die as the cost of retaining them outweighs the benets. With a high enough skills base in the

country, new globally competitive niche manufacturers will arise from the ashes, Willemse says.

However, Willemse volunteers, the decline of old factories will be very painful.

The government is making a po-litical decision to prop up manufacturing but the long-term ramications of this are that it may be very costly and still fail, with the potential of knock-on effects to ruin the entire economy, she says.

Focus should rather be on niche manufacturing that can compete but rigid labour legislation makes it hard for entre-preneurs to enter this market.

Willemse says there is a huge la-bour pool of unemployed struggling to get into the market who would work for low wages until they acquired skills.

Some go further, arguing that with-out government support almost all manu-facturing will fail, allowing capital to nd new non-factory places to invest where there are competitive advantages, such as agriculture and tourism. This is a more efcient use of resources, they contend.

Of course conicting parties will continue to punt their own cost-benet analyses, such as in motor manufacturing. In this sub-sector government support has helped foster investment and jobs, but the ultimate

cost-benet is difcult to calculate.Pan-African Capital Holdings

chief economist Iraj Abedian, is also wary of procurement quotas though less vociferously so. The market changes far more quickly than government policy, which is a blunt instrument, so if imple-mented policy must be exible, he adds.

However, Abedian concedes that industrialists like this policy as it allows them to be more competitive and poli-ticians support it because it looks like they are doing something.

In the UK, state support for manu-facturing in the 1970s eventually proved nancially unsustainable but the election of a strong free-market leader, Margaret Thatcher, in 1979 to save the sinking ship came with signicant pain in terms of job losses, particularly for low-skilled workers, and social unrest, such as strikes. Eventually the economy reinvent-ed itself with services and high-tech jobs.

Recently China chided the US for threatening to adopt the same pro-tectionist, albeit less marked, trade poli-cies as it did in the Great Depression of 1930. China makes the point that back then it prolonged the pain; an argument that many Western economic historians now accept.

But Columbus Stainlesss senior commercial manager Charles Cammell, points out that rivals such as China are subsidised by their states.

Here in South Africa there was a time in recent years when role players expressed concern at weakness in the manufacturing sector. That period of disquiet has ended.

South African manufacturers remain in a perilous position as many rivals, such as those in China, are subsidised by their state

6 November 2011

South African Rand to US dollar (May - November 2011)

6.9674

7.3483

7.7292

8.1101

June 3 July 4 August 2 August 31 September 29

8.4909

6.5866

ZAR

focus onMANUFACTURING

November 2011 7

Our manufacturing sector is dy-ing; we are becoming a service econo-my with no money for services, Congress of South African Trade Unions (Cosatu) general secretary Zwelinzima Vavi said in October, according to a post by politi-cal journalist Stephen Grootes on a so-cial media website.

Understandably Vavi may not be a popular gure among factory bosses but few export manufacturers would strongly disagree with the severity of the trade union leaders choice of words. Indeed the entire language used to de-scribe the sector has changed.

The de-industrialisation of South Africa is gathering pace, the Financial Mail quoted National Auto Glass man-aging director Keith Luyt as saying in September.

Luyt is not the only businessper-son to use the term de-industrialisation, which refers to the inevitable shift away from building tangible goods in most developed economies towards the pro-vision of services such as nance, soft-ware, ipping burgers and consulting.

Manufacturing Circle has also used the term de-industrialisation, with the nality the term implies.

De-industrialisation is going to continue and were going to have high unemployment until we stop this erosion, otherwise its going to lead to social and political unrest, Jennings told the

Financial Mail.Understandably role players such

as industrialists and trade unions may well be exaggerating somewhat as part of a lobbying strategy.

In most developed countries ser-vices now dominate economies. Over the past thirty years industry has moved to emerging markets but in the last twenty years this has not been the case in South Africa. Indeed according to Statistics South Africa the decline here predates the global recession and has taken place as the economy has matured. Manufac-turing has fallen from a nominal 20% of gross domestic product GDP) in the early 1990s to 13.9% earlier this year.

Manufacturing competitiveness has fallen 73% against China over the past decade according to Pan-African Capital Holdings, and a signicant 58% against the US. The drop against the EU has only been about half of that.

Rand strength since the global re-cession of 2009 (the volatile currency has weakened somewhat since then) is cited by both manufacturers and trade unions as a key reason for loss of competitive-ness. There have been calls to devalue the currency but South Africa may not have the luxury of bulging nancial resources to purchase foreign currencies that could weaken the rand. Indeed Reserve Bank governor Gill Marcus has downplayed any dramatic steps to do so.

But Abedian disagrees. He ar-gues that while there is a cost to main-taining a somewhat weak local curren-cy, countries such as in Vietnam, have shown it is viable.

Abedian says a longer-term policy of ve to ten years should be maintained to increase competitiveness of the cur-rency and stabilise it, particularly given that there is no end to volatility in sight. An exchange rate of R8.20 to R8.60 to the US dollar should be maintained with the Reserve Bank only intervening in the market when it moves out of this band. This implies authorities would not ignore the exchange rate were the rand to col-lapse, fuelling imported ination, but also buying rands if this were to occur.

There is a nancial cost to buy-ing dollars to weaken the rand after it strengthens but this has to be weighed against the social and political cost of losing a further 200 000 to 300 000 jobs, Abedian adds.

Welt Oddy, which exclusively manufactures stainless steel tanks for the export market, gives practical expression to what is a competitive exchange rate.

Managing director John Oddy simply states: Our business is not sus-tainable at R6.70 (to the dollar) where it was for a long time.

While there is criticism that some local factories are not efcient in terms of production methods, Oddy stresses,

Employment Trends in the Manufacturing Sector

Source: Statistics South Africa, Q2 2011 Quarterly Labour Force Survey, Courtesy Manufacturing Circle

2 050 000

2 000 000

1 950 000

1 900 000

1 850 000

1 800 000

1 750 000

1 700 000

1 650 000

1 600 000

1 550 0002008 Mar June Sep Dec

2009Mar June Sep Dec

2010 Mar June Sep Dec

2011 Mar June

8 November 2011

Our manufacturing processes are glob-ally competitive, we have the latest tech-nology and in terms of hours to produce a tank we are up there with the best.

There is also a negative knock-on effect of a strong currency. With the strong rand it is cheaper for us to import parts and materials and our local suppli-ers lose business to imported products, Oddy says.

Even if the country were able to weaken the currency this would lead to higher import costs and drive ination higher. Steep factory ination in South Africa compared to abroad is another reason cited for declining competitive-ness. But that ination does not come from healthy demand outstripping supply but rather soaring electricity prices that are un-avoidable after years of underinvestment.

Labour costs have also risen faster than the general consumer price index, a distortion of the free market in times of muted demand and high unemployment. But it is not only the highly regulated la-bour market but poor skills and low pro-ductivity that count against the country.

In Germany, the exception to struggling manufacturers in the devel-oped world, high labour costs have not stopped the post-recession recovery there. But there are key differences. That country has among the most advanced high-end engineering capabilities as well as a technically skilled staff lower down the workplace hierarchy.

Despite high labour costs in Ger-many, productivity is high, in part be-cause worker representatives sit on many company boards, fostering common goals among all employees. Worker buy-in through board representation is an option yet to be seriously explored in South Africa.

While there are moves afoot to improve education and training here, even if successful they will take a gen-eration to bear fruit. Poor training is un-derlined by ongoing skills shortages in some South African sectors despite the anaemic economy.

Port costs out of Transnets Durban harbour, the most important facility for manufactured exports, are also higher than in many of Europes biggest ports.

South Africa appears to suffer the double-curse of having the worst of both worlds, rst and third, high costs and low productivity.

Cosatu, a key constituency of the governing party, is unlikely to agree to a less regulated labour market if employ-ment remains stable and no new jobs

are created. There is simply no incen-tive for them to create jobs, rather their interest is to retain members jobs. But if retrenchments gather pace, as they have markedly in the clothing sector for nearly a decade, workers will have more reason to compromise. This has already taken place in the rag trade where South African Clothing and Textile Workers Union (Sactwu) agreed to a lower mini-mum wage.

Senior elements in the government have also raised the idea of relaxing la-bour conditions for young workers but this has yet to see the light of day and lacks hearty presidential endorsement.

But what is not in doubt is that a collapse of manufacturing will hit the ser-vices economy too, as Vavi says, there is no money for services, highlighting the

inter-connectedness of sectors.Even if manufacturing never

returns to its towering heights of two decades ago, an orderly transition of the economy may be preferable. If it is more precipitous, the picket lines that plagued relatively wealthy UK in the 1970s and early 8s could seem like a picnic compared to the social unrest that could occur in a society as unequal as South Africa.

Willemse concludes that the government should take advantage of the more severe economic crisis in de-veloped markets to encourage invest-ment here, instead of moves to discour-age foreigners, such as the delaying tactics and onerous conditions it has attempted to put on the WalMart ac-quisition of Massmart.

Tanks Despite being a world-class industry, the tanktainer industry is being hit by local manufacturing woes such as the strong rand

November 2011 25www.rimexsa.co.za / www.rimexmetals.com Tel (011) 793 3695/8 E-mail projects@rimexsa.co.za

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focus onDOMESTIC MARKET

November 2011 11

Michel Basson, Sassdas Western Cape Consultant, said at this years 4th Annual South African Ferro-alloys Confer-ence in September, that the association believes that with government support and industry assistance, the domestic stainless steel industry has the capacity to generate economic growth and cre-ate jobs.

South Africa supplies more than 50% of the global chrome requirement, however it produces less than 3.5% of global stainless products and uses only 0.6% of stainless steel products, said Basson. This offers an opportunity for growth in South Africa.

Columbus Stainlesss Charles Cammell says: In the cost breakdown of a typical stainless steel, such as 304, up to 80% of the ex-works price is made up of raw material costs. Considering this, more stainless steel could easily be produced in South Africa.

Stainless Steel is the fastest grow-ing in a grouping of competitor metals. In a recent global growth comparison, stainless steel had grown a signicant 6.16%, beating aluminium at 3.51%, steel at 3.47%, copper at 3.23%, zinc at 3.02% and lead at 2.41% annual growth. See Graph 1.

However, one must take into con-sideration that growth in the industry is also due to a recovery to previous high levels after the slump encountered during the recession.

As a result of the global crisis in 2008, consumption of stainless steel in South Africa declined dramatically in 2009 by some 30% over 2008.

So while the recovery of the market back to the levels of 2007 and 2008 indicates growth, the real chal-lenge is that the South African stainless steel market remains under threat. The relative strength of the rand coupled with government subsidies for Chinese manu-

Stainless steel industrycan grow with state support

Consumption of stainless steel is returning to pre-recessionary levels,this means the PHENOMENAL GROWTH seen last year is beginning to normalise;

however, stainless steel still holds immense growth potential

facturers of consumerware and other manufactured goods in excess of 10%, is placing massive stress on the domestic manufacturing industry and as a result we are seeing a continued decline in employment in the stainless steel manu-facturing industry, says Columbus Stain-lesss Charles Cammell.

The local industry is innovative and tenacious; It has shown resilient re-covery after the recent recession, largely due to the huge depth in human capital and skills as well as the fact that stainless steel is non-toxic, recyclable and has the fastest growing global usage compared to competitor materials, says Basson. Sassda believes the industry is also well organised and structured and recog-

Lead 2.41%

Copper 3.23%

Zinc 3.02%

Aluminium 3.51%

Steel 3.47%

Stainless Steel 6.16%

Graph 1: Annual growth comparison

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

250 000

20 000

15 000

10 000

5 000

0

Graph 2: Apparent Domestic Consumption (1991 - 2012)

Global Economic Crisis

Recoveryto previous

levels

nised by government as a social partner.According to Sassda members

forecasts local annual growth of between 5% and 7% for 2011 can be expected.

South Africa has more than 70% of the worlds know reserves of chromite. The rst stainless steel was produced in Middelburg by Rand Mines in 1966, at around 36 000 annual tons. Since then through Columbus in a joint venture formed through the IDC, Highveld Steel & Vanadium and Samancor in 1991, production expanded to 500 000 tons per annum.

In 2002 Spanish player Acerinox acquired the majority share in Columbus Stainless and invested in cold rolling to expand production to 720 000 tons per annum. Columbus is currently targeting the 1 million tons per annum mark.

Domestic apparent consumption gures for the year to July 2011 with forecasts to the end of 2011 show an-other strong year for the local market. However, imports are down indicating that the growth of 2010 to 2011 was a correction rather than an on-going growth trajectory. See Graph 2.

According to gures composed of 7 months of actuals and 5 months of forecasts, apparent consumption for

Source: Sassda

Source: Sassda

12 November 2011

2011 should be up 13% from 2010, from an increase of 40% from 2009 to 2010. See Graph 3.

A 65% increase in primary im-ports from 2009 to 2010, indicated that there was immense scope to increase foreign investment, which in turn means localisation and job creation. However, the 2011 gures show that this massive increase was a rectication and return to pre-recessionary gures rather than a general growth forecast. Primary imports for 2010 2011 are expected to in-crease by 13%.

An increase in local conversion of 40% from 2009 to 2010 indicated that South Africa had the capacity to in-crease jobs; however, this gure is es-timated to slow to a more conservative 15% increase in 2011.

A 35% increase in nished prod-uct imports for 2010 was reversed and a decrease of 16% in 2011 is forecast.

The apparent consumption g-ures for 2010 indicated that there were unique primary import opportunities in long, tube and wire stainless steel prod-ucts. These are imported as up to now the initial investment in such producers did not make it feasible, says Basson.

However, with solid growth in the local conversion of stainless steel the

picture might be able to change with our alliances to the BRICS countries offering possibilities in export. In 2010, imports of long products were up 54%, imports of wire products were up 132% and im-ports of tube products were up 25%.

These gures are correcting in 2011 and if we compare growth from January to July 2010 to growth from Jan-uary to July 2011, imports of long prod-ucts fell 9%, wire products fell 48% and imports of tube products were up 24%. See Graph 4.

However, the most signicant gures for 2010 were in imports of hol-lowware and tableware products. These consumer products contributed a whop-ping 80% to the total amount of nished imports in 2010. See graph 5.

The sector offers immense poten-tial for localisation. Imports grew 44% to 10 254 in the year to December 2010 and 45% in the seven months to end July 2010. This indicates that general con-sumer demand was increasing in line with a market recovery. Imports of hol-lowware and tableware for 2011 are showing similar levels to 2010, sliding only 5% from 4839 tons for the seven months to July 2010 to 4582 tons in the same period of 2011.

There was the potential for 80% of consumer products to be localised in 2010, says Basson. This is a potential increase of 8 000 tons in local conversa-tion, which would equate to more than 2 000 new jobs being created. Ac-cording to Columbus, for every 4 tons of stainless steel converted in South Africa, 1 job is created.

In 2004, 43% of domestic hol-lowware was manufactured locally. In 2005 it dropped to 18%, and then rose slightly to 20% in 2006, 28% in 2004 and 29% in 2005.

focus onDOMESTIC MARKET

Graph 3: Apparent Consumption Breakdown 2009 to 2010 to 2011 (actual figures to end July, forecast to end 2011)

2009 2010

Primarylocal supply

(91 653 tons)

Primary imports (25 319 tons) Primary

local supply (122 231 tons)

Primary imports (41 870 tons)

Primary imports

up 65%

Loca

l con

verti

ng u

p 33

%

Loca

l con

verti

ng 1

16 9

72 to

ns

Loca

l con

verti

ng 1

64 1

01 to

ns

Primary Local

Supply up 33%

Finished product imports (9 757 tons)

Finished product imports (13 141 tons)

Finished product

imports up 35%Apparent consumption

(126 729 tons) Apparentconsumption

up 40%

Apparent consumption (177 242 tons)

Primarylocal supply

(141 684 tons)

Primary imports (47 138 tons)

Primary imports

up 13%

Primary Local

Supply up 16%

Finished product imports (11 080 tons)

Finished product

imports down 16%

Apparentconsumption

up 13%

Apparent consumption (199 902 tons)

Loca

l con

verti

ng u

p 15

%

Loca

l con

verti

ng 1

88 8

22 to

ns

2011 Figures courtesy of Sassda

November 2011 13

In January 2004, a sunset review of the anti-dumping duties on stainless steel hollowware originating in or im-ported from The Peoples Republic of China (PRC), Chinese Taipei and South Korea was submitted by Sassda on be-half of its members who manufacture in this category.

This Anti-dumping review was rejected by the International Trade Ad-ministration Commission (ITAC) in August 2004. ITAC said: After considering all parties comments in response to the essential facts letters, the commission made a nal determination that the ex-piry of the duties on the subject product originating in or imported from the PRC, Chinese Taipei and South Korea would not lead to continuation or recurrence of material injury.

Unfortunately this was proved in-correct and the local hollowware market has since been decimated.

The South African stainless steel industry is well positioned for economic growth. Current predicted growth in-dicates 2 500 additional jobs will be added on a national level in the follow-

ing year, says Basson. These gures are based on calcu-

lations, assumptions and the growth pre-dicted in the industry, but are very dif-cult to evaluate in terms of accuracy due to the uncertainty in the global market.

Sassda believes that growth is dependent on government and industry support. It would like to see the industry

reclassied as part of a priority sector. This means that it would receive greater access to funding and government initia-tives. It would also like to see assistance in duplicating national relationships be-tween government and industry on a pro-vincial level, as well as assistance with infrastructure, funding and administration of national and regional initiatives, says Basson.

Sassda believes that assistance with creating markets through govern-ment agencies and departments will also lead to success. For example, hol-loware offers an opportunity for local manufacturing and job creation.

If the Departments of Health and Correctional Services and Defence would procure their requirements for eat-ing utensils and cooking pots from local manufacturing suppliers, it would mean that local conversion rates of stainless steel would increase and jobs would be created. This industry can be sustainable with continued government support and can even develop into an export industry with Africa as the main market focus, says Basson.

Ingot / Billet& other semis

Long Products Flat Products Tubular Products Wire Products

16 000

14 000

12 000

10 000

8 000

6 000

4 000

2 000

0

up 51%down 28%

up 54%down 9%

up 83%up 50%

up 25%

up 24%

up 132%down 48%

2009 2010

Jan-July2010

Jan-July2011

Trend not sustained

Trend not sustained

Trend not sustained

Trend not sustained

Trend sustained

Graph 4: Primary Imports Breakdown 2009 - 2010 and 2010 (Jan-July) - 2010 (Jan-July)

Figures courtesy of Sassda

predominantly uses nickel pig iron over primary nickel, which gives them a com-petitive edge. As far as the nickel market goes, while iron and zinc are almost double where we were in 2008, nickel is the one thats lagged.

Reuters reported in late October that nickel prices had seen heavy losses in September, but have since steadied helped by optimism that the euro zones debt crisis will be dealt with successfully, but it believes further weakness could prompt higher cost producers to act.

I expect nickel to fall below $18000 again and if prices stay there for any length of time then it would get some support from nickel pig iron production be-ing cut, said Will Adams of Fastmarkets, according to Reuters.

Nickel pig iron average costs are put at $17 000 to $18 000 a ton. The London Metal Exchange (LME) three-months nickel price is currently at about $18 900 a ton. Last month, nickel fell to $16 800 a ton, its lowest since December 2009.

According to Steel Guru, TEX Report Limited reported that world nickel produc-tion during the rst six months of 2011 was 791 000 tons, up by 12.5% year on year, mainly due to substantially bigger output of Chinese nickel pig iron production which is up by about 50% year on year.

In China, nickel pig iron production expanded to 120 000 tons during the rst six months of 2011 to meet stronger de-mand in nickel from stainless steel mills. In the Western World, nickel production during the period was 418 000 tons, an increase of 8.1%, while the Eastern World produced 372 000 tons including the Chinese pro-duction, an increase of 15% for the year.

See the ISSFs World Crude Produc-tion graph.

14 November 2011

Global stainless steel demand to grow 6%According to Business Live, International Ferro Metals chief executive Chris Jor-daan believes the stainless steel market will grow at an average 6.8% per year to 2015, with a positive read across to the ferrochrome market.

With demand for ferrochrome directly proportional to stainless steel production, Jordaan believes his com-pany is well positioned to benet from the growth.

According to independent mining and metals analysts CRU, the long-term outlook for stainless steel production re-mains strong and record production of 33 million tons is expected in 2011 from 31.7 million tons in 2010.

More than 50% of stainless steel growth is expected to emanate from China. According to Eti Krom, global ferrochrome production will rise above 10million tons and demand will soar to 9.5million tons in 2012.

International Ferro Metals Limited shares crashed on the London Stock Ex-change in early October on a full year loss due to low ferrochrome sales due to a stronger rand, but the company has main-tained a positive outlook as the market for stainless steel continues to rise. The rand strengthened from levels of R7.50 to the dollar in July 2010 to R6.80 to the dollar by 30 June and electricity tariffs in-creased by 26.7% in April, the compa-ny said, adding that the low subsequent ferrochrome contract price was mainly attributable to declining nickel prices, which resulted in the destocking of stain-less steel and ferrochrome inventories.

The rand was trading at R8.14 to the dollar in late October.

According to Metal Miner, ONeal Steel believes the best way to forecast the global climate in the stainless steel industry and assess the health of the industry is to look at both the commod-ity grades, which are your typical stain-less grades used for consumer kitchens, pots and pans and similar, and speciality grades, which are used for petrochemi-cal, aerospace, nuclear and the like. The higher-grade speciality sector is looking very strong. In the oil industry, in offshore drilling, they need more and more materi-als, so its very strong, says ONeal.

The market has changed signi-cantly since 2005, when the stainless market took off in China. The country

Q1

9 000

8 000

7 000

6 000

5 000

4 000

3 000

2 000

1 000

0

ISSFs World Crude Stainless Steel Production Graph

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4201120102009

World Crude SS Production

China

Asia (without China)

Western Europe & Africa

The AmericasCentral & Eastern Europe

It is forecasted that world crude stainless steel production in 2011 will be about 34 million tons, up 6.25% from 2010, for which about 1.65 million tons of nickel is required.

The International Stainless Steel Forum (ISSF) says that based on pre-liminary numbers, global stainless crude steel production in quarter 1 of 2011 was 8.4 million tons. This represents an increase of 8.2% when compared to quarter 4 of 2010, on already strong levels of production. Most regions report-ed increased production volumes in the quarter-on-quarter comparison. However, the Americas region shows the strongest growth, with 37% increase from quarter 4 2010 to quarter 1 2011.

Global crude stainless steel production in the three months of 2011 reached an all-time high for a rst quarter.

Total production grew by 8.6% to nearly 8.4 million tons. The highest year-on-year growth was again seen in China: with an increase in production of 18% to almost 3.1 million tons. The Asian stainless steel producers, China excluded, kept their production almost unchanged at 2.2 million tons. The Western Europe/Africa region increased production by 6.4% to 2.2 million tons. The Americas saw a further increase of stainless steel production of 6.9% to 0.8 million tons.

ISSF does not expect that these growth rates will be sustainable over the rest of 2011. The current perception is that markets will return to de-stocking due to the current high volatility of raw mate-rial quotations. For the full year, ISSF nev-ertheless expects an overall increase in global stainless steel production that will see another year of record production.

The two new coal-red power stations be-ing built in South Africa, offer huge op-portunities for the stainless steel industry.

The Medupi Power Station, which is located at Lephalale in Limpopo, is a super critical plant that is able to operate at higher temperatures and pressures than previous generation boilers. The supercriti-cal design is a rst for Eskom and with the higher efciency will result in better use of natural resources, for example, water and coal, and will have improved environmen-tal performance.

Medupi will have six boilers each powering an 800 MW turbine, produc-ing 4800 MW of power. It will be the largest dry-cooled coal red power station in the world. Contracts have been placed with Hitachi to supply the boilers and Al-stom to provide the steam turbines for this plant. At R33.6 billion, these are the big-gest contracts ever placed by Eskom.

The cost of the Medupi power plant project was initially R80 billion but this has ballooned to an estimated R125 billion.

Medupi will be supplied with coal from Exxaros Grootegeluk coal mine, lo-cated to the north of the site. The brown-eld expansion project entails increasing the coal mined from 19 million tons to 34 million tons a year to supply the new Medupe power station with 14.6 million tons of coal a year. The cost of the Groot-egeluk expansion project is R9.5 billion.

The rst 800 MW unit is expected to be commissioned in 2012. It will be synchronized to the national grid in Sep-tember 2012, with the other units sched-uled to come on stream every six months thereafter. The planned operational life of the station is 50 years.

Construction at Medupi stated in 2007 and as a rule, a coal-red power station takes about eight years to build.

Medupi means rain that soaks parched lands, giving economic relief.

Kusile is the second coal-red pow-er station being built; it is a six-unit, super-

critical coal-red power plant, with 4800 MW of gross output. It is being built close to the existing Kendal power station in the eMalahleni area in Mpumalanga.

Kusile is the second most advanced coal-red power plant project in Eskom af-ter Medupi. The rst unit is planned for commercial operation in 2014. The First generating unit scheduled to be enter op-eration by mid 2014, with the subsequent ve units being commissioned at eight month intervals thereafter and the last unit is expected to be in commercial operation by 2018. The cost of the Kusile power plant project was initially R80 billion but this has since ballooned to an estimated R142 billion.

There has been a substantial amount of stainless steel supplied by Columbus Stainless for these projects, says Columbuss Colin Barnes. Columbus Stainlesss 3CR12 has been specied for chutes, bunker and chute liners, and con-veyor systems due to its excellent abrasion and corrosion resistance in wet materials-handling environments. 316L stainless

steel has been specied for the top sec-tions of the ue stacks and 304L has been specied for tanks and vessels for the wa-ter treatment plants, says Barnes.

A total of 4 800 tons of 3CR12 plate would be required for the coal bunkers for the boilers at both Medupi and Kusile power plants. In addition to the 3CR12 bunker liners, there are also chutes and chute liners and conveyor sys-tems that have been specied in 3CR12. Columbus has supplied more than 500 tons of 3CR12 plate for chutes, chute lin-ers and conveyor systems for Medupi.

A total of 250 tons of 316L plate has been supplied for the ue stacks at Medupi and a further 145 tons will be required for the ue stacks at Kusile. A to-tal of 300 tons of 304L plate has been supplied thus far for the tanks and vessels for the water treatment plant at Medupi power station, says Barnes.

Approximately 2 000 tons of 3CR12 plate has been supplied thus far for the Grootgeluk projecy for chutes and bunker liners, says Barnes.

Medupi & Kusilecount on stainless steel

focus onPOWER STATIONS

November 2011 15

Large scale A 316L chimney ue section before instalment at Medupi

companyPROFILE

November 2011 17

Stalcor is back. It has emerged from the melting pot of KMG as a bright face in the stainless steel industry.

Stainless Steel and Aluminium Corporation (Stalcor) was established in 1973 and after 38 years in the industry, the company is going back to its roots. It has been reborn with a fresh new face and a reinvigorated new brand.

Stalcor has, since its inception, been an independent entrepreneurial stockist and distributor concentrating on stainless steel and aluminium. Over the years, this prestigious business has been owned by JSE-listed companies, Malbak Limited and Dorbyl Limited.

In 2002, Stalcor and Baldwins Steel were acquired by a management consortium and formed part of Kulungile Metals Group. In 2007, Kulungile Metals Group was sold to KMG Steel Services Centres (KMG), a company controlled by Blackstar Group.

The group grew successfully for the next two years, acquiring Global Roong Solutions, the owners of Brownbuilt Metal Sections, HH Robertson, Country Roong and Helm Engineering.

Then in 2009, the aftershock of the 2008 global nancial crisis be-gan in South Africa. Although in part this was alleviated by the infrastructure spend from the FIFA World Cup Soccer, it was felt throughout the steel, construc-tion and manufacturing industries, says Chris Ransome, the newly appointed chairman of Stalcor.

The Stalcor business adapted and resized in accordance with market conditions. Survival during this period was an achievement in itself, says Ransome. And now we are returning

The new face of

Stalcor

In a rst of its kind initiative for the metals industry, Stalcor is introducing a CUSTOMER LOYALTY PROGRAM, which includes a 14% customer

shareholding in Stalcor and an entitlement to receive dividends declared by the company

Stalcor (PTY) Ltd Shareholding Structure

Blackstar Group 50.1%

Stalcor to its former glory.KMGs shareholders, Blackstar,

have implemented proactive and far reaching restructuring strategies to revi-talise the company. The operations of Baldwins Steel have been merged with those of Robor; and Global Roong So-lutions has been unbundled to become a standalone subsidiary of Blackstar, which has recently dual-listed on the JSE Securities Exchange.

A leaner and more focused Stalcor is poised for a make-over. The company is now ideally positioned to grow on an affordable, sustainable and disciplined basis, says Ransome.

Restructuring includes a major rebranding to re-establish Stalcor as a leading supplier in stainless steel.

Stalcor is a R600 million turnover per year business, says Ransome. And this enviable position is where we are starting our growth initiative from.

Blackstar and management have recently injected fresh capital into Stalcor with management taking up a signicant equity stake in the business while Blackstar retains control of the company. These capital injections are a real vote of condence, says Ran-some. The shareholding proves that both Blackstar and the management of this company remain 100% committed to the success of the business.

The company, which has been an ofcial local distributor for Colum-bus Stainless since 1994, has recently strengthened its ties with the local mill.

StalcorManagement

35.9%

StalcorCustomer

Loyalty Trust 14%

All Stalcors customers

The dividends arising from

Stalcors profits for the year will be divided according to shareholding,

with all customers receiving their share

of this tax-free income in proportion to their purchases

for the year

18 November 2011

Columbus has re-afrmed and committed its on-going support to the new Stalcor.

Columbuss Charles Cammell says: Columbus Stainless is encour-aged by the strategic focus of Stalcor. Its shareholders, investors and staff have certainly demonstrated tenacity and we look forward to forging a bond with the new Stalcor for the benet of the en-tire domestic market. A strong local mill aligned distribution sector enhances the stainless steel offering to end-users and should continue to provide a stimulus for local conversion and job creation.

Stalcor, which has four branches nationally, is also relocating its Durban branch from Pinetown in the rst quarter of 2012. The company is growing in line with market and customer demands, says Ransome. The relocation of the Durban branch highlights the requirements of the market and Stalcors belief that dynamic innovation is the best solution.

Stalcors most exciting initiative

is the launching of a rst of its kind customer loyalty incentive in the metals industry. Stalcor is busy implementing programs that include a 14% shareholding in the company for the benet of Stalcor customers. This will allow them to share in the all benets of being a shareholder coupled with an entitlement to receive dividends declared by the company.

This Customer Loyalty Shareholding is housed in a special purpose trust whereby all its beneciaries are Stalcors clients. At the end of the nancial year 14% of Stalcors dividends are paid to the trust, which then allocates this tax-free income to customers in proportion to their sales for the year.

Chris Ransome and Gordon Odgers, an independent non-executive director of Stalcor, both saw the bene-ts of a similar project in the automotive aftermarket industry.

A loyalty-based customer share-

holding initiative is reective of the close relationship that exists between the company and its customers and has proven to generate considerable revenue growth and protability, says Ransome. It is a very effective and transparent tool for continually building customer-base and a truly innovative way to reward your loyal clients.

As Stalcors brightness is forged, with it comes a renement of its vision as a customer-centric stockist and dis-tributor. Its can do, will do, must do at-titude, makes it an essential contributor to its customers success. It believes in sharing its triumphs with its loyal custom-ers and ensuring staff feel proud and in-vigorated to be part of the Stalcor fam-ily. Suppliers view Stalcor as a highly valued and reliable route to market.

This is only the beginning, says Ransome with a glimmer in his eye. Staff are invigorated and more excit-ing developments and innovations are on the cards.

companyPROFILE

Stalcor, which has four branches across the country, has driven improvements across the board

November 2011 19

Strategy includes hiring the best and brightestStalcors management team (below) is made up of Chris Ransome, Paul Miot, Willem Fourie, Craig du Plessis and Judy Coppin. Andrew Bonamour, the chief executive of Blackstar, is a non-executive director, as is Blackstar director William Marshall-Smith. Gordon Odgers, the previous managing director of Midas, joins as an independent non-executive director to oversee the Stalcor Customer Loyalty Trust.

Chairman Chris RansomeChris has been closely associated

with Stalcor since 2002, when he led the buyout of Stalcor and

Baldwins from Dorbyl. A Chartered Accountant (SA), Chris was the

chairman of both Midas and DCD-Dorbyl from 2002 to 2009 and

Global Roofing Solutions from 2003 to 2008. Over the past 12 years

Chris has acquired shareholdings in various sizeable businesses and

infused them with his entrepreneurial flair, innovation and enthusiasm yet maintaining high levels of

accountabilty. Generally, business is not complicated its about

doing the basics well, demonstrating high levels of excitement about

your customers and products while maintaining administrative disciplines, explains Ransome.

Stalcors independent media and strategy advisor Michael Louw Michael has previous experience helping manage the KMG brand back in 2002.

He comes back to Stalcor as an independent consultant to help with the branding, marketing and strategy of the company.

The Stalcor brand has always been associated with quality products and outstanding customer service, these are just two of the character traits that will

ensure the future growth for the revitalised company.

Managing Director Paul MiotPaul joins the company with a private equity background. He is the former managing director of an international

electronic components company. Paul, a Chartered Accountant (SA)

with an MBA from London Business School, is a businessman with vast

hands-on experience. Paul jumped at the opportunity of participating in the

Stalcor business which he believes is well positioned to take advantage

of opportunities in the market.

Commercial Director Willem Fourie

Willem is the previous general manager of KMG and has been in the business for the past 16 years. He has a wealth of financial and

managerial experience and his background is in carbon steel. He is now proudly involved with

Stalcor, the 38 year market leader in stainless steel and aluminium.

I like things to happen quickly and to the book, says Willem.

Sales and Marketing Director Craig du PlessisCraig has been in the steel industry for the past 10 years

and with Stalcor for the past seven. I have always enjoyed a sales orientated environment and more

recently making strides in our marketing strategy. I am a proud member of a 38-year-old brand and extremely grateful to our customers who have supported Stalcor.

Customer and Supplier Credit Director Judy CoppinJudy Coppin has been employed in the steel industry for 32 years and has been actively involved in credit

management for 21 of those. I enjoy all aspects of credit and am look forward to making a positive contribution to a new Stalcor, which together with our clients will go

from strength to strength in the market.

focus onAUTOMOTIVE PARTS

November 2011 21

The catalytic converter industry is the single largest user of stainless steel in South Africa. It has accounted for more than 38%, or about 50 000 tons annually, of Columbuss local production. In the past 15 years the South African catalytic converter industry has achieved remarkable success, averaging compound growth in the region of 14% a year. According to the Catalytic Converter Interest Group (CCIG), in 2008, the industry generated more than R22 billion in export revenue, with over 85% local content.

However, the industry is under threat. The change from the Motor Industry Development Programme (MIDP) to the 2008 formulated Automotive Production and Development Programme (APDP) will present signicant challenges to the component export sector of the automotive industry when it comes into effect in 2013.

One of the main reasons for the changes to the MIDP was a need to align the industry support model with the World Trade Organisations (WTO) agreement on subsidies and countervailing measures, called the SCM Agreement.

Under the SCM Agreement, the MIDP is deemed to be a prohibited subsidy in that it is contingent on export performance as well as the use of domestic resources over imported goods. These are the so-called red light subsidies in that they go directly against the WTOs objective of discouraging a most-favoured-nation treatment by essentially encouraging members to treat all WTO members in a non-discriminatory manner.

The APDP design has evolved from an export-based incentive to a local manufacturing incentive, regardless of whether the motor vehicles are sold

locally or abroad. The South African catalytic

converter industry is composed largely of global multi-national manufacturers that supply vehicle manufacturers (OEMs) in mainly Europe and the US. The local sector was established in the early 1990s as a 100% export focused industry to take advantage of the incentives offered by the MIDP, which ultimately provides the OEM with import duty rebates. The establishment of the sector has been hugely successful under the MIDP.

At its peak South Africa produced over 14% of the worlds catalytic converters.

The catalytic converter industry is by far the largest South African beneciator, with more than

90% of locally mined precious metals, valued at more than R15 billion worth of platinum group metals (PGM), beneciated in 2008 alone. This represents more than 17% of the total PGM mined in South Africa. The industry is also the largest consumer of locally produced stainless steel.

The problem for the local catalytic converter industry lies in South Africas location disadvantage and the associated logistics and nancing costs needed to be overcome to ensure that it can remain a global competitive player. This was initially provided for by the MIDP but, because the benets under the APDP program will be insufcient to offset these location disadvantages, OEMs have already started to award

Local catalytic converterindustry under threat

The R22 billion per year industry MAY NOT SURVIVE the move from the Motor Industry Development Programme (MIDP) to the soon to be instituted

Automotive Production and Development Programme (APDP)

Catalytic coverters are 100% encased in stainless steel, to withstand heat and corrosion

catalytic converter business elsewhere. Once a program is awarded to alternative locations outside of South Africa, it is highly unlikely that South Africa will win that catalytic converter business back after the program life of 5 to 7 years.

Graph 1 is a typical time line for new business placement and demonstrates why decisions for new programs commencing 2013 and running beyond 2016 have already been made.

The industry is in peril, says Ken Dewar, the executive director of the CCIG. No serious new programmes have been awarded to South Africa in the past three years.

The industry is a substantial generator of highly-skilled employment. It employs more than 5 000 people directly, excluding OEMs and Columbus, and it is estimated that more than 30 000 additional indirect jobs result from upstream and side-stream suppliers, particularly in the pressings sectors.

The industry has invested more than R4 billion in plants, equipment, people development and process development over the past 15 years to support transfer of production and new technologies to South Africa. This has resulted in signicant skills development in the support industries as well as within the catalytic converter industry itself.

However, the international companies who have all set up shop in South Africa under the MIDP now have no incentive to stay. Manufacturing the catalytic converters in South Africa will

become too expensive to compensate for the dislocation costs and plants will begin to disinvest and move to the countries like Mexico, Poland and Hungary which are closer to the OEM plants and offer signicant investment and business incentives.

The Department of Mineral Resources (DMR) and the Department of Trade and Industry (dti) are both aware of the issue, says Dewar. And discussions are currently being held to alleviate the situation.

The Catalytic Converter Interest Group (CCIG), in partnership with the dti, has taken a multipronged approach to try and prevent the demise of the industry.

Beneciation of South Africas strategic raw material resources is one of the key points set out in IPAP 2, says Paul Thompson, CCIGs chairman.

However, there is a disconnect between what is in IPAP 2 and the imple-mentation programs like the APDP, which is currently not facilitating beneciation.

For this industry, it is crucial to offset the PGM nancing costs, which are incurred due to the distance to market inherent in a South African manufacturing location. The PGM pipeline can be over 160 days, and this has to be nanced largely at South African interest rates, which are high.

It also hopes to enhance the cost competitiveness of the South African supply chain, with particular emphasis on logistics costs. The catalytic converter industry in South Africa has made great strides in achieving ongoing

improvements in terms of internal cost efciencies, driven by the advantages of scale provided by signicant volume growth, together with expansion of the local value chain and internal operating process and methods improvements.

Graph 2 illustrates how these factors have allowed SA-produced catalytic converters to remain globally competitive ex-works in the face of progressive but signicant reductions in the level of incentive support provided by the MIDP.

As the catalytic converter manufacturing industry in SA consists almost exclusively of subsidiaries of global companies supplying global OEMs, the industry is subject to pressure from auto manufacturers to aggressively reduce costs on an ongoing basis. Being part of the global supply base, catalytic converter manufacturing companies in SA benet directly from the cost efciency methods and processes of their parent companies in response to these pressures, says Thompson.

The CCIG also believe that industry and government need to work together to nd ways of reducing structural costs in South Africa that are shown to be globally uncompetitive.

These include, among others, port charges, uncompetitive input costs, highly regulated labour costs and high and escalating electricity and gas costs.

Further expansion of Free and Preferential Trade Agreements, including emerging markets is considered to be a key prerequisite to grow South African

22 November 2011

Graph 1: THE OE vehicle manufacturers: A typical new cap projection timeline

20052006

20072008

20092010

20112012

20132014

20152016

2017

3 year time fram lost since initial APDP discussions started, which will leas to a gap in future manufacturing cycles

Initial concept

Component sourcing decisions

Prototype build

Start ofproduction

Face lift

Run-out

MIDP APDP

DESIGN

SERIES PRODUCTION

SOURCE: CCIG

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

catalytic converter exports beyond the historical markets of Western Europe and North America, especially considering that most future growth in global automotive manufacturing is expected to be centred in China and India in the next 10 plus years. The identied growth markets have high barriers to entry and progress with FTAs/PTAs with these countries is critical to the industrys ability to grow export volumes beyond the traditional Western markets, says Thompson.

The APDP looks set to go ahead in its current form, however, minor concessions regarding catalytic converters may still be possible.

The path ahead now lies in the beneciation process, says Thompson. The government has started identifying barriers in the value chain and looking at interventions to encourage beneciation, which is happening but without a co-ordinated approach to quantify the real impact.

Beneciation is crucial to the

entire steel industry, not only the catalytic converters. The dti is committed to supporting the process through tax incentives and other initiatives. It believes South Africa is a country with signicant potential for mineral beneciation, which will create jobs beyond mining.

Without the successful interven-tion of the government and interest groups, the catalytic convertor industry in South Africa faces major upheaval and perhaps even the demise of the entire R22billion per annum industry.

November 2011 23

FREESUBSCRIPTION

Interested in getting your favourite stainless steel magazine delivered to you or a valued client?Contact us for a free subscription.E-mail: melissa@stainlesssteelmagazine.co.zaor call Sassda on 011 883 0968

20

18

16

14

12

10

8

6

4

2

0

Volume vs Incentive vs PGM Qualifying Value

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

EXPORT VOLUME (million) AV.Pt price ($ 00) (Qualifying) NET INCENTIVE (% Revenue)

$425

.24 $6

45.6

2

SOURCE: CCIG

RECESSION

24 November 2011

When the Sassda Levy was extended to include imported material, the rationale was for the additional income stream to contribute to securing the associations nancial viability and strength. This additional source would have broadened the funding base, so providing an increased element of independence, and thereby raising the credibility of Sassda in representing its broad membership.

Increased imports of at products, however, naturally decreases the local producer levy on this product type.

At the time of its introduction, the import levy was seen as providing revenue for the provision of more services to the Sassda membership, without raising the Sassda levy on local material.

Import sector chairperson, Gary Crawford, says: Some may say that Sassda has not provided more services since the introduction of the import levy. A few members go as far as to say that Sassda does not provide adequate member services.

He adds that when he was elected, he was disturbed by the perception. Desk research on major stainless steel associations by sector champion, Lesley Mortimer, showed that Sassdas offerings are at least on a par.

In any case, says Crawford, being an inclusive association, Sassda is run by its members who direct the activities of Sassda staff via the sector and main committees and the board of directors. If you want Sassda to give you what you need, dont sit on the sideline and complain get involved and make yourself heard.

As a living and dynamic organisation, Sassda should continually tweak its offerings to meet member needs, making every effort to support and promote the use of stainless steel for all of its members to the best of its ability. It follows that members should therefore also contribute to the funding of Sassda on a fair and equitable basis, says Crawford.

Since 2000, imports of stainless

steel grew to approximately 30% of primary material supply. In 2006, the inconsistency in the levy system was addressed.

The Sassda Articles of Association were changed, and the Import Levy commenced in March 2007, thus levelling the playing eld between importers of primary material and companies purchasing locally manufactured primary product.

Clause 6.4.2 states: On all primary product imported by a member, liability for the payment of which shall rest on the person paying for such primary product.

A complete list of stainless steel and stainless steel products by HS Code and description (applicable and not applicable to the import levy) is to be found on the Sassda website.

The mechanics of the import levy are straightforward.

1. The company/person responsible for payment of the import levy is the company/person for whom the material is cleared through customs.

2. Appointed auditors RSM Betty & Dickson send a request for the

declaration of relevant stainless steel imports to each of the Sassda identied importers at the end of each quarter.

3. Importing members submit a declaration to RSM Betty & Dickson for the kilograms imported during the previous quarter. Should an importer who has previously declared not import during a particular quarter, a nil declaration must be made to RSM Betty & Dickson.

4.Upon receipt of a declaration from a member, RSM Betty & Dickson will draw up an invoice for the appropriate amount (currently: kilograms x 11c), and send the invoice to the member.

5. All accounts are payable within 30 days of date of invoice.

6.RSM Betty & Dickson transfers the received revenue in a lump sum into Sassdas bank account, thus maintaining condentiality of individual member tonnages.

In February 2007, Sassda identied 48 importers of primary stainless steel material, and a further 23 probable importers. Currently, 23 Sassda members are declaring imports thus contributing in a very real sense to the associations activities.

In reality, says Crawford, the Sassda import levy system is based on honesty. Sassda cannot (nor should not) police members to check who is importing. Importing members should understand the benets to be gained from Sassda membership and voluntarily declare imports. Until recently, Sassda did not act against non-declarers who were enjoying Sassda benets such as the use of the associations cross and balls trademark.

Now, says Crawford, non-complying members (who are in contravention of the Articles of Association and Code of Conduct) will be requested to reform. After due process and no attempt by the member to make amends, membership of Sassda will be terminated. Fortunately, this year only once has it been necessary to take such action.

IMPORT LEVYSassdas

Column 1: How the levy works

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26 November 2011

TECHNICAL DESKfrom the

The austenitic stainless steels maintain a global market share of somewhere around 70% of the total stainless steel market.

This range of alloys has a marvelous range of properties, which is why they have such a big market share. These properties are:

ExcellentweldabilityExcellentpropertiesathigh

temperatures, up to over 900 degCAble to withstand

temperatures as low as 270 degrees (liquid nitrogen)

Verygoodtoughness,evenafter welding

Resistancetoawiderangeof aggressive corrosive environments

Goodductilityandabletobe deep drawn and pressed into intricate shapes

So, with this range of fantastic properties, why is there an ongoing process of developing new stainless steel grades?

The answer could be that these grades are expensive, primarily because of their high nickel contents, or because their mechanical strength is not particularly good. However, the main reason is probably because of the 1 factor which is considered to be the Achilles Heel of the austenitic stainless steels that is Chloride Stress Corrosion Cracking. (SCC)

So what causes this phenomenon?

Let us look at where we nd SCC in austenitic stainless steels. This corrosion mechanism is only found where a very specic set of conditions occur. These are:

The presence of halide ionsin the environment most commonly the chloride ion, but also includes bromides and iodides. There is no set level of these ions to initiate SCC often relatively low levels can be problematic, as evaporation-concentration can raise the concentrations to levels at which we see the SCC initiate. Chlorides are particularly problematic, as we nd

high levels in sea water, in many rock types and mineral deposits, chlorine is used as a disinfectant and water purier and hydrochloric acid and chloride compounds are frequently used in chemical, petrochemical and pulp and paper processes.

A temperature of over about50 degrees centigrade, although SCC has been seen in isolated cases at ambient temperature.

A tensile stress this can bean externally applied stress, residual stresses from forming of fabrication, cyclic stresses from temperature changes, or from welding.

SCC occurs when ALL of these factors are present, and only when they are ALL present.

We are often asked what causes SCC. That is not a totally understood phenomenon, although a great deal of work has been done on it. It is clearly a function of the crystal structure of the austenite, (as we dont see it occurring in ferritic and martensitic steels), and how this responds to an applied tensile stress. We see SCC in the 200 series (manganese containing austenitic stainless steels), as well as the conventional nickel containing 300 series, so its not the nickel that causes it.

We also see SCC occurring in some of the nickel based austenitic alloys, so it is not a function of relatively marginal corrosion resistance.

SCC is a particularly dangerous form of corrosion, as the inception stage of the corrosion is not obvious. The very ne branching cracks that occur can progress quite far before penetration takes place, and then we nd that the corrosion covers a wide area of the vessel or pipe. SCC often also manifests under cladding or insulation in process equipment so isnt seen until a leak occurs. We also often nd SCC will initiate from the outside of a process vessel, where there is no obvious corrosive medium (we often ignore the concentration of

chlorides in heating or cooling water, inside insulation jackets); inspection of these vessels takes place on the inside, so this is often missed until too late. Once SCC is observed, it is generally impossible to repair cutting out of the affected area and welding in a patch often generates such signicant additional stresses that the rest of the vessel immediately cracks.

The occurrence of SCC is one of the primary drivers for the development and growth of the duplex stainless steels these have many of the corrosion resisting properties of the austenitic stainless steels, often substantially better, and also have good weldability and toughness, but are immune to SCC. Another major advantage of the duplex grades is their substantially increased mechanical properties, which allows thinner sections to be used, often resulting in a more cost effective end result in spite of these alloys greater up-front cost.

The key to preventing SCC is that we need to understand the specic factors which cause SCC, and ensure that we take protective measures to change the environment or to remove at least one of the initiating factors, which will stop SCC from happening.

with Ken Dewar

40 years of service to the industryPinion and Adams KwaZulu-Natal was founded in

1971 as a general jobbing sheet metal operation with a spe-cial interest in fume and dust extraction. In 1992 the continued success of the company necessitated a move to new premises and an industrial site was purchased in New Germany, near Durban, where a purpose designed factory was built.

A member of Sassda since November 1998, this mod-ern facility allowed the company to grow, but proved inade-quate after only 6 years. The present premises on 5000mwas purchased and extensively modernised, providing a crane served assembly and fabrication hall with 6m below the crane hook allowing for the handling of sizeable fabrications in stain-less steel and mild steel.

In 2004 a neighbouring 900m building was acquired to house the epoxy powder coating plant and to provide ad-ditional assembly space.

Pinion and Adams is headed by two dynamic individu-

als in that of Gerald Anthony and Nic Davies with 24 and 21 years service respectively. They have invested in Meitrak, an electronic production management system and more recently in Metacam Enterprise which will complete the link between Cad/Cam and production.

The Pinion and Adams policy of only investing in excel-lent people and the nest equipment has resulted in the crea-tion of one of the most modern and versatile sheet metal opera-tions in KwaZulu-Natal covering the full spectrum of sheet metal engineering and fabricating. Amongst others, their machinery includes CNC punching, CNC Laser Cutting, CNC Bending and Robotic welding.

The company supplies top quality precision sheet metal components to a variety of industries including the au-tomotive, electrical, electronic, pulp and paper, sugar and air ltration sectors. Their strength lies in producing light to medium fabrications using modern equipment and systems at competitive pricing.

PINION AND ADAMS

NEWSindustry

November 2011 27

Epping Montague Gardens Vredenburg Port El izabeth Durban Johannesburg +27 (0)21 505 1000 +27 (0)21 552 1196 +27 (0)22 713 4781 +27 (0)83 448 2588 +27 (0)31 705 1664 +27 (0)11 538 7600 +27 (0)12 653 2534

Leading the way as suppliers of

stainless steel fasteners.

RA&M

1/0

2/11

NEWSindustry

FIRST CUTExtreme Accuracy with Starrett Precision Tools Range

When even a thousandth of a millimetre can make an inor-dinately huge difference in accuracy levels, companies with high-end machine tools require precision measurement tools that offer no compromise. First Cut, a leading southern African distributor of international capital equipment and consumables, places its trust in the Starrett range of precision tools to provide customers with complete peace of mind.

There are many instances in which high levels of preci-sion are required. Fields such as aerospace machining, tool and die-making and injection mould-making require extremely minute tolerance levels, says Andrew Poole (pictured right), Managing Director of First Cut.

Since the tolerance levels of these instruments are very tight, there is a need to incorporate high quality machining procedures to fabricate these components. The availability of modern manufac-turing techniques has made it possible to fabricate these precision instruments and Starrett has become synonymous with producing uncompromising quality in its product offering, Poole adds.

Typically used for CNC machining and turning centres, mill-ing machines, manual lathes, EDM (electrical discharge machines), WEDM (wire electrical discharge machines), surface and jog grinders, honing machines, boring mills, laser cutting machines, ve-axis milling machines and high-speed milling machines, preci-sion measurement tools ascribe to Abbes Principle, Hookes Law and Hertzs Formula for their accuracy.

The LS Starrett Company was founded 1880 in Athol, US and today employs about 1 800 people worldwide. Most preci-sion tools continue to be manufactured in the Athol plant, where it is not uncommon to see devoted generations of toolmakers with 30 or more years of experience producing micrometers, callipers, rules,

levels, electronic gauges, dial indicators and gauge blocks. The company also offers metrology equipment including optical measuring projectors, vision systems and multi-sensor measuring systems, many of which are custom engineered.

In order for precision measuring instruments to func-tion properly, they should possess the following characteris-tics: a high degree of sensitivity; a high degree of accuracy and minimum inertia in the moving parts of mechanism, explains Gary Willis, First Cut Sales Director.

Starrett boasts a wide array of precision measur-ing equipment including standard, electronic digital and long-range callipers; standard, depth, solid-rod inside and digital micrometers; electronic digital and dial test indica-tors; electronic digital height, taper, small hole, dial bore, dial thickness and electronic digital depth gauges.

28 November 2011

ZANO

GEN

Zanogen exhibits at Metal Recyclers AssociationW Fearnehough Africa, well known as Zanogen

Machine Knives, manufactures, supplies, re-grinds, sharp-ens and reconditions industrial machine knives, blades and related products for the steel, paper, plastic, timber and leather industries. W Fearnehough Africa collects and delivers within the Gauteng area and Western Cape.

In pursuing W Fearnehough Africas strategy, the company exhibited at the Metal Recyclers Association AGM on Wednesday 14th of September at the Killarney Country Club in Johannesburg.

Exhibiting at the MRA AGM was a great oppor-tunity for us to network with customers, potential custom-ers and learn about the current trends in the reclama-tion industry, says Aswin Nagar, sales executive of W

Fearnehough Africa.Metal recycling conserves natural resources, saves

energy and contributes to the South African economy. Quintin Starkey of the MRA explains: The MRA

has a diverse membership base made up of organisa-tions that are engaged in the collection and processing of more than 80% of all scrap metal in South Africa. The organisation currently represents more than 100 metal recyclers or dealers within South Africa. The MRA acts as an intermediary between its members and the relevant government departments and is pro free trade between SADC partners and other international markets. The re-cycling industry enjoys a healthy, mutually benecial relationship with its suppliers and looks to develop this relationship with future events.

Members meeting in the CapeDuring the past 3 months Sassda was active in Western Cape with

two regional members meetings and technical courses that attracted more than a 100 students and a very successful sports day.

During regional meetings held in May and March, Sassda used the opportunity to introduce the Sassda strategy to local members.

A guest speaker from NIASA explained to members that there will be opportunity for member companies in the South African Nuclear Program. Members can now become involved through a capability and capacity questionnaire albeit that they do not have current nuclear accreditation.

During the second meeting in May members gave their input regard-ing a future regional structure, meeting agendas and regional involvement on National level. Members also gave Sassda a mandate to investigate the re-activation of CAPSEC (Cape Stainless Equipment Cluster).

Sassda also attended the Nuclear Industry Localisation conference in Cape Town in the beginning of June in order to understand the potential opportunities for the industry in the South African Nuclear program. Sass-da will now use the knowledge gained to proactively assist and position members to maximise on the opportunities that does exist for localisation and future exports in the nuclear industry.

NEWSsassda

November 2011 29

New signs to Sassdas head ofceSassdas Johannesburg head ofce in Morningsides The Wedge

Ofce Block recently underwent some restructuring. To make things easier for members to nd the ofces, Rimex and

Plasma Cut kindly manufactured and donated signs to the ofce.Sassdas Lesley Mortimer says: Many thanks to Rimex and Plasma

Cut for donating their time and product to making these beautiful signs.

JHB O

FFIC

E

WESTERN CAPE

KZN business mission to AustraliaSassda KwaZulu-Natal were invit-

ed to participate in a Business Mission to Queensland Australia, which meant that this invitation could be extended to its KZN membership. Applications were subject to a selection process based on meeting certain criteria including that of a companys exist-ing BBBEE status.

The successful company would re-ceive a 60% cost sponsorship and this would include the cost of ights, hotel ac-commodation, meals, transport as well as all the arrangements.

The business mission objectives in-cluded that of:Promotingandencouragingjointventure

possibilities; Allow KZN companies the opportunity

to explore others and to expand into these markets;PromoteKZNasanattractiveinvestment

destination;Market&promotepackagedproducts;CreationofexportopportunitiesforKZN

companies; Increase awareness on SouthAfrica in

general but more particularly, KwaZulu- Natals expertise.

The mission will include pre-arranged one-on-one, business meetings as well as business seminars. This high delegation mis-sion would include the Honourable MEC for Economic Development & Tourism, Mike Mabuyakhulu; the Head of the Dept of Eco-nomic Development & Tourism; CEO Trade & Investment KZN; CEO of Tourism KZN and a group of about 10 local KZN busi-ness leaders from local business practices.

Sassdas Clive Phillpotts says: I am extremely pleased and proud to conrm that our local member Solar Primeg was suc-cessful with their application and joined the group leaving for their seven day visit to Aus-tralia on Sunday 16 October.

Congratulations and well done to Megandra Moodley for this ne achieve-ment, may he reap the rewards of good ad-ditional business with the Aussies.

KZN NEWS

30 November 2011

NEWSsassda

NEW APPOINTMENTSSassda appoints new staff members

Sassda has recently appointed two new staff members. Matlhodi Raseroka joins as Sassdas Marketing and communica-tions manager and Mankabe More, who joins as Sassdas skills development manager.

Matlhodi RaserokaAfter Matric Matlhodi went to the Cape Peninsula University of Technology

to study a national diploma in marketing and sales management. Her career began in the retail industry as a trainee manager, from there she held various positions in sales for companies such as Kimberly Clark, Kraft foods and South African Brewer-ies before moving into marketing working as a brand manager for companies such as Foodcorp and United National Breweries. She also had an opportunity to work for the National lottery at its inception as a marketing consultant. She later worked for Sasol as a customer relationship management specialist, where her role was to manage the relationships between Sasol Group Shared Services and its customers and to do the marketing of its product offerings.

Her current role as the marketing & communications manager for Sassda entails among other things developing and implementing external communication strategies, policies and tactics to ensure positioning and proling of Sassda in line with its strategic plan, the development of the marketing and communication budget, rendering effective liaison support to external relations as well as enterprise development.

Matlhodi says: I am motivated by challenges and responsibility. I believe in planning and proper management of my time. I have the ability to see through a project from start to completion. I am results orientated, decisive, creative, organised and I can work well in a team and as an individual.

Matlhodi enjoys swimming, reading and watching movies in her spare time.

Mankabe MoreMankabe matriculated from Gen-

eral Smuts High School in Vereeniging. She then went on to earn her B Com and B Com Honours through Unisa.

Mankabe is a qualied Skills Development Facilitator (SDF) and has worked with both the Services and Trans-port Setas in this capacity as an SDF and Learning and Development Specialist.

Mankabe is taking over as the skills development manager at Sassda.

Mankabes extramural activities in-clude volunteering in community service initiatives, going to the gym and movies.

Mankabe says: My strengths are my adaptability, religion, and loyalty. My ultimate motivation is making a positive difference in the world.

November 2011 31

NEWSsassda

KZN

Sassda gives backSassda launched a Corporate Social Investment (CSI) initiative in Sep-

tember. The new marketing and communications manager, Matlhodi Rase-roka, visited four schools in disadvantaged communities, including Eastbank High School in Alexandra and Altmont Technical School in Protea, Soweto.

On behalf of Sassda, she donated belts to the schools. Earlier in the year she also visited Sibonile School for the blind (pictured above).

Sassda donated assets from the exhibition truck, which included chairs, tents, a generator, two air conditioners and kitchen furniture, to Thuto Mfundo adult learning centre.

The school has adult classes from grade 1 to grade 12, where they do sewing, art, computer programming, beading and other skills development train-ing courses.

Raseroka says: It is important for us to give back to the communities where we and our members operate.

NEW MEMBERSCompany Description

Legacy Marine Stainless steel mechanical pipe installations and fabrication of structured steel work

Kirk Marketng Stainless steel edge trims and interior design

Stainless Steel Solutions Chemicals for pickling, passivating, surface cleaning etc.

IRC Rails it Stainless steel balustrade, spiral staircases and staircases

Style Balustrading Stainless steel balustrade, spiral staircases and staircases

Information Sharing SeminarSassda KwaZulu-Natal and their

MoU Partner TIKZN, were instrumental in putting together a seminar to assist its membership in respect of a few critical business related topics and or possible concerns, as to how to go forward in respect of the subject matter presented during the morning information sharing seminar.

Following the ofcial welcome ad-dresses by Donny Pethan of TIKZN and Clive Phillpotts of Sassda KZN, Jessica Slater as Program Director ensured the smooth running of the mornings events, with speakers presenting their s