The left-wingers who control SA industrial policy are, I hear, celebrating that the British government has stepped in to prevent the UK’s last blast furnaces from closure and may even nationalise the last British Steel integrated steel plant at Scunthorpe in Lincolnshire.
British Steel was privatised long ago, its final owners a Chinese group that “saved” Scunthorpe in 2020. This has not stopped its “rescue” now by Labour becoming a national cause célèbre, as the Chinese had threatened to shutter its two remaining blast furnaces to stop ruinous losses.
Even as Labour critics have welcomed the move, the SA steel industry approaches its own day of reckoning with ArcelorMittal SA (Amsa) abandoning its longs division, with two blast furnaces, in Newcastle. The state is paying to keep the plant running while it finds a buyer. Good luck with that.
The government tightly controls the local steel industry. It levies high tariffs on imports to protect Amsa and tightly controls sales of scrap metal, in the hope of growing a black-owned steel “mini-mills” sector. The scrap controls enable smaller mills to make cheap longs (rods, bars, tubes and rails), which Amsa says makes Newcastle unprofitable.
In other words the department of trade, industry & competition has made a mess of the steelmaking business here, not even considering the many small steel and metals fabricators, making everything from steel containers to windows and doors, that are forced to buy local steel at inflated prices.
The Scunthorpe rescue will lift the spirits of local officials and, obviously, there’s something deeply attractive about making steel and the awe-inspiring heat in a blast furnace. The only other two blast furnaces here are at the Amsa flat products plant at Vereeniging, upon which it now says it will concentrate.
That may not mean much. Amsa is part of a large Indian conglomerate and it would not take much to close all local operations down. It mothballed an entire modern steel plant at Saldanha in 2020.
It is too easy to be starry-eyed about steel. Our installed steelmaking capacity, including electric arc furnaces, is 4-million to 5-million tonnes a year. We consume about 5-million tonnes a year and import about 2-million tonnes. It’s foolish to set our faces against imports when there’s a flood of steel on the market. Low import prices could cut inflation and kick-start infrastructure projects and exports.
We don’t want to stop making SA steel, but it won’t matter if one day there are no more blast furnaces here. What matters is not how we make our steel but what we do with it. In a world rapidly erecting trade barriers in every direction, a small economy like SA’s must be more open.
As a young reporter I covered the assault by Margaret Thatcher’s government on a then nationalised British Steel. She wiped millions of tonnes of steelmaking capacity off the face of the earth and the economy never missed it. And nothing we know of, creates more carbon dioxide than a blast furnace.
What matters is producing the right amount of steel in the right way. Modern arc-furnaces make great steel. In SA we already make nearly half our steel this way. Italy makes more than 80% of its steel in arc furnaces; the US 70% and India almost 60%.
We are outliers and falling behind. The saving of Britain’s last two blast furnaces may be a cheerful story but the costs will soon become apparent. We must prepare for a new industrial future and not hold on to old fantasies.
• Bruce is a former editor of Business Day and the Financial Mail.
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