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  • Shortage of galvanised steel hits building industry – Mittal Steel SA unable to deliver

    Some construction companies have been unable to complete projects ahead of their traditional mid-December shutdown due to shortages of galvanised steel from Mittal Steel South Africa, the country's sole maker of the product.

    Mittal manufactures galvanised steel, or steel coated in zinc to prevent rust, and sells flat rolls of the product to processors, which manufacture items such as metal roofing and automotive steel parts.

    Michael Pimstein, the chief executive of Macsteel Service Centres, the biggest merchandiser and distributor of steel products in southern Africa, said it had been forced to cut back to three-day and four-day working weeks as it did not have enough galvanised steel to process.

    "We have orders but Mittal's been unable to deliver," he said.

    Macsteel, which holds 15 percent of South Africa's galvanised sheeting market, was between two and three weeks behind in "genuine orders", and was waiting for material that was up to six weeks old. Much of the problem was in the roofing range products, Pimstein said.

    Mittal spokesperson Tami Didiza said it was aware of what he termed "a slight backlog" for galvanised steel.

    "The reason is that during the third quarter there was a surprising pick-up in demand for galvanised steel. This increase came at a time when Mittal Steel South Africa had to close one of its lines for planned annual maintenance," said Didiza. The backlog would be alleviated "shortly".

    Pimstein said the backlog would probably be resolved by the end of the month but this would be too late for the construction industry.

    Pat Goldrick, the chief executive of Cashbuild, South Africa's largest retailer of building products, said producers had been forced to import galvanised steel.

    Despite tariffs, it was sometimes cheaper to import than to purchase supplies of galvanised steel from Mittal, he said. "But every time we try to import, Mittal would reduce their price. They are abusing their position."

    Mittal has come under fire for its import-parity pricing practice. It sets domestic prices using the cost of imported steel, plus an assortment of charges including tariffs, transport, insurance and storage costs.

    Since 1996, importers of semi-manufactured iron or steel products have had to pay a 5 percent ad valorem duty. In addition, there are anti-dumping duties on a range of products.

    Two of Mittal's four galvanised lines have been decommissioned because, according to Mittal, they were old and economically unviable.

    As part of the group's R9 billion capital spending programme announced this year, it is building a third automotive galvanised line at Vanderbijlpark to be commissioned next year.

    Pimstein attributed the unexpected uptick in orders of galvanised steel in the third quarter to a combination of rising demand, and stocks having been aggressively reduced in the local market in anticipation of price declines.

    "The market is suspicious of price reductions and no one wants to sit with high inventories." He did not believe that the government's infrastructural spend was the cause

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