[South African] Smelters need support to survive – by Mark Allix (Business Day Live – September 4, 2014)


SMELTERS and foundries need support if they are to survive. As a start, Eskom has to sort out its electricity supply problems, and government’s R4-trillion infrastructure plan needs to get under way soon.

Better still, the private sector should be encouraged to provide more traditionally sourced energy. BHP Billiton has turned off its Bayside aluminium smelter in KwaZulu-Natal. Smelting costs too much, even though the company has a hugely preferential electricity pricing agreement with Eskom.

Bayside, BHP Billiton’s Hillside aluminium smelter and the Mozal smelter near Maputo in Mozambique together used about 9% of South Africa’s total electricity output.

A chunk of state infrastructure funding is being spent on building new energy capacity — mainly the delayed Medupi and Kusile coal-fired power stations, but also the Ingula hydropower project in KwaZulu-Natal.

The manufacturing sector is under pressure from strikes, above-inflation wage and increases in administered price, as well as poor maintenance and development of infrastructure.

Smelters and foundries cannot run without a consistent supply of competitively priced electricity or gas to produce common metals such as aluminium and cast iron. Sasol’s monopoly on gas pricing adds to these competitive woes.

Smelters produce large volumes of molten metals from ores and downstream foundries process scrap metals. These processes make an array of products for industries including aerospace, electrical engineering, transport, containers and packaging and, especially, construction.

Bronze, brass, steel, magnesium and zinc produce castings of different qualities, shapes and sizes. These can be recycled in secondary smelters through remelting scrap metals. But many intermediate costs are involved, including for metals separation.

Alloys are closely associated with the iron and steel industry, which is also the main consumer of ferroalloys — alloys of iron with a high proportion of one or more elements such as manganese, aluminium and silicon.

The leading producers of ferroalloys are China, South Africa, Norway, Russia and Ukraine.

Much of the world’s ferrochrome, an alloy of chromium and iron used mainly in stainless steel production, is produced in South Africa, Kazakhstan, India and Turkey.

China’s entry into these markets has hugely altered the global balance. It has replaced South Africa as the top producer and Russia is catching up.

South Africa is the largest exporter of raw chromite ore to China and holds by far the world’s largest reserves. However, its exports of beneficiated ferrochrome to China are rapidly declining as a result of expensive and erratic electricity supply, and other rising costs. This is completely at odds with the government’s industrial growth plans.

For the rest of this article, click here: http://www.bdlive.co.za/business/industrials/2014/09/04/smelters-need-support-to-survive