Delay threat to projects as steel bar crisis looms

large building and construction projects in sa could grind to a halt within weeks because of a shortage of rebar — reinforcing steel.

the shortage was caused by a breakdown last month of arcelormittal’s main furnace in newcastle, kwazulu-natal.

the south african reinforced concrete engineers association said yesterday the breakdown meant there would not be any rebar available this month, possibly halting building and construction projects in sa, and resulting in delays and additional costs.

this comes at a time when the construction industry is reeling from the effects of the global economic recession and the spending hangover after last year’s soccer world cup.

while there was huge state investment in fixed capital last year, the government has been slow since then to issue new tenders and tardy in paying for work done. the private sector is complaining bitterly.

the association said the shortage had been made worse by the closure last year of the unprofitable reinforcing-steel rolling mill, cape town iron & steel works (cisco) , which had been a large supplier of the steel.

"members of the association are reporting serious shortages of rebar and mesh rod, which has been totally unforeseen and beyond their control," rod mountford, director of the association, said in a statement yesterday.

sa’s two remaining suppliers, scaw metals and the davsteel division of cape gate, were unable to provide construction firms with their required volumes, leaving a two- to three-month lead time for imported rebar .

"the imported product is more expensive than locally sourced reinforcement. individual importers of rebar will also have to ensure that the quality of the steel complies with south african standards and specifications," mr mountford said.

"steel mills have already been notified there are price increases due this month and in march."

the closure of cisco underscores the problems in sa’s steel industry, with the government adding pressure to bring down domestic prices, saying they are not competitive for a developing nation.

steel mills said they had been notified by arcelormittal of a price increase this month and next, further stretching a strained industry.

spokesman themba hlengani said arcelormittal’s newcastle blast furnace had developed "cold conditions" in early december .

"it was restarted successfully in january and is currently operating at capacity," he said.

"this unfortunate situation has obviously led to delays in servicing the customers’ orders.

"we are in the process of working closely with customers to address the urgent supply issues and we are hopeful of being back to normal supply levels for domestic demand in the next two months."

ian broderick, the south african reinforced concrete engineers association chairman, said yesterday cisco had accounted for up to 25% of sa’s reinforcing steel market.

"i don’t think there will be an upswing in the short term. most of cisco’s shortfall in the market will be taken up by arcelormittal," he said. "the guys in the industry have been given an allocation for the month (february) by the mills.

"we’re not going to get what we want. you cannot place any more orders for february or march."

cisco had been owned by sa’s second-largest construction and engineering group, murray & roberts. it cited adverse market conditions as a reason for closing the mill in the western cape last year.

last month, it announced that conditions in south african markets had become tougher, and complained that it had not been paid for public projects.

the building industry organisation, master builders sa, warned in december that the industry was in crisis.

arcelormittal sa announced much-improved annual results this week. however, diane laas, industry analyst at investec asset management, said on tuesday sa’s primary steel maker had lost six weeks of production at both its vanderbijlpark and newcastle operations at the end of last year, after its furnaces went offline.

at its annual results presentation this week, arcelormittal sa ce nonkululeko nyembezi- heita said the company was raising march prices 5% or 6%, and there would possibly be a price hike again in april.

but an industry insider said the combined february and march increases amounted to 16,9%.

arcelormittal sa holds nearly 75% of the steel market share in sa, a near-monopoly that is being targeted in the government’s drive to lower steel prices.

prices and availability of products could also be affected by arcelormittal’s dispute with kumba iron ore, and its relations with politically connected imperial crown trading.

the black-empowered non- mining company was awarded arcelormittal’s iron-ore rights at kumba’s sishen mine by the department of mineral resources last year.