Forging and steel industries both affected by unpredictable steel price

Owing to the volatile and unpredictable steel price from local raw steel mills, the steel industry is looking less to locally-forged parts and equipment, and more to imports, says steel supplier and processing company Allied Steelrode.

“As an industry – and in common with the forging industry – we are also really at the mercy of the current steel price volatility. As much as we believe in purchasing locally, and would really like to continue doing so, this pricing volatility is making imports so much more attractive right now.

“The South African forging sector is therefore struggling to cope with the challenges currently facing their industry, as are we,” Allied Steelrode executive director Warne Rippon points out.

He explains that the forging and foundry industry is consequently having to compete against the resulting dramatic increase in foreign imports from countries such as China.

“We are affected by this situation to the degree that we – like many others in local industry – are now forced to source parts from overseas rather than locally, thereby inadvertently contributing to the knock-on effect being experienced by the local forges and foundries sector,” he states.

For these reasons, and in common with the steel industry, the future of the local forges and foundries sector, therefore, depends a lot on how the local steel mills position themselves and their pricing policies moving forward.

Allied Steelrode CEO Arun Chadha further notes that the forges and foundries industry depends largely on the supply of scrap metal for its source material. With a comparative lack of large infrastructure projects and less steel being used, the supply of scrap metal has decreased commensurately.

Allied Steelrode produces scrap metal that it sends to local forges and foundries to be used in the creation of more steel products. On a positive note, the steel industry is seeing an improvement in certain markets owing to exports of finished products.

“Between 2015 and 2017, the volumes of imported steel decreased nationally by about 50%. However, Allied Steelrode continues to import products that are not manufactured locally at a rate of about 3 500 t a month. These steel imports are sourced from Europe and from China. And, due to the current steel pricing volatility, we will be forced to look at increasing our imports,” he states.

Chadha highlights further that the lead time to import steel from other countries has had a low impact on the way that the company works in the last two years. This is owing to the company finding locally sourced steel before looking to the international market. Chadha explains that a common steel that the company imports is high tensile steel that is used in the automotive industry.

“For automotive grade steel, the lead time to import it is admittedly quite long. But then again, Allied Steelrode is aware of this, and thus plans accordingly six months in advance,” he says, highlighting further that this helps the company ensure that it supplies its customers with a consistent supply of high tensile steel.