Two years of intensive research by the Southern Africa Stainless Steel Development Association (sassda) in association with the Steel and Engineering Industries Federation of Southern Africa; now gives local stainless steel fabricators insight into growth opportunities in new export markets as well as import substitution within the South African market.
Sassda Executive Director, John Tarboton, comments; “Previous data available to us only tracked primary product import and export figures; whereas we are now able to drill down into 100% of total data within the stainless steel industry. These include finished products such as catalytic convertors within the automotive industry which make up 28% of total South African consumption and tank containers manufactured for the food and chemical industries, for example.
“This will allow for more accurate tracking and measurement of true import and export figures and will allow sassda to assist local fabricators to explore new local and export opportunities.”
Unlike primary stainless steel products, previously only finished products that were 100% stainless steel were included. This was because the World Customs Organisation’s (WCO) Harmonised System (HS) codes do not necessarily specify what the finished product is made from.
“However, we know for example that approximately 3% of the total pressure vessels manufactured are stainless steel pressure vessels and that percentage can now be applied to the total pressure vessels exported or imported. This means imports of fabricated products, industrial equipment and components into South Africa can now be categorised in a manner that makes it possible to identify the input materials into the final product,” explains Tarboton.
Similarly, South African exports of any finished stainless steel products are not identified in a manner that captures their stainless steel content, offering no identification of the value or volume of these exports leaving the country.
Tarboton says; “It is well-known that global trade is sometimes categorised illegally when imported, in order to attract only the lowest rate of duty, which further exacerbates the situation. For example, within the engineering industry there is a large component of ‘strategic import plant’ which is allowed into the country duty free as ‘staged consignments’, which do not allow for any measurement of the input materials into the equipment.
“Another area of uncertainty in the statistics, from our point of view, is that a significant portion of trade is measured as ‘units’ and not as kilograms, which makes the estimate of stainless steel content almost impossible in many cases.”
In order to try and get a better understanding of both the import and export trade, sassda embarked on a review of 10 years of available customs data, assigning an estimate of the stainless steel content in each applicable HS code.
While it is clear that there is uncertainty in this estimate, it does give approximate comparisons in this previously unreported area of the industry, and will allow the monitoring of these specific codes to determine where imports and exports are growing or declining.
Leveraging new fabrication markets locally
South Africa already possesses a world-class and globally competitive flat product producer, in Columbus Stainless, which exports approximately three quarters of its production around the globe.
However, there is a significant component of the required local market which is not produced locally, due to the form or finish required, the grades not produced locally, due to uneconomic quantities required or purely due to price, resulting in the continued significant levels of unfairly priced material being imported into South Africa. Currently primary product imports into the country amount to some 40 000tpa.
Equally impressive export performance is seen in the downstream fabrication industry in South Africa. Of the stainless steel primary product used in South Africa (approximately 170 000 tpa), almost 40% of this is exported as fabricated, value added products.
The biggest component of this is the catalytic converter and exhaust industry, which converts over 40 000 tons annually and exports this to Europe, the USA and the Far East. The tank container industry is equally impressive, exporting more than 20 000 tons of high value product into the global shipping market.
“This is the part of the industry which is well known and is able to be quantified through the statistics published by SA Customs. However, we believe there is a significant component of the fabrication industry which “flies below the radar”, as exports and imports and which we intend to quantify and cultivate,” Tarboton comments.
Sassda will be implementing a strategic needs analysis to identify potential import replacement opportunities locally. They intend to identify between two to three large volume products of the approximately 74 000 tonnes of finished products currently being imported into South Africa.
“We would look to increase the export market by identifying products that are currently being exported, meaning that our local production is competitive. Then we would look at countries that are importing that product, but that are not importing from South Africa and see if those countries are potential new markets for exports. On the other hand, we are looking at substituting imports into South Africa, in finished products that could either be manufactured competitively by our current members or are possible opportunities for new entrants into the market.”
Once sassda member capabilities have been identified, opportunities lie in increasing the scale of downstream local fabrication of the 74 000 tonnes of finished product currently being imported.
Growth initiatives for export into African markets
A second initiative being undertaken by sassda is looking at International Trade data in order to find potential markets for locally fabricated product. Many less developed countries have quite simple trade statistics, and identifying specific product imports is often difficult. However, the development of a software computing program now made available to sassda, allows an analysis of all global trade in any specific HS code to identify potential market opportunities in a defined target market.
“If we have producers of food and beverage equipment looking for opportunities in Africa; it may be impractical and expensive, to visit all targeted countries especially since the HS code data from these countries may be inaccurate or incomplete, making market identification difficult. However, if we are able to access export data from all countries exporting food and beverage equipment around the world, it is then possible to see which African countries are importing significant volumes, and to target our export drives into those specific areas.”
Sassda will be embarking on both of these initiatives in the coming months, and will be working with local fabricators looking to identify import substitution or new export opportunities.