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South Africa may not immediately benefit from lower gas prices

SA Steel Industry

South African steel industry needs protection policies

Owing to the discovery of and exploration for shale gas in the US and Canada, as well as gas finds off Mozambique and Asia, the global steel industry is set to undergo a radical makeover, but South Africa may not immediately benefit from the lower gas prices, states advisory company Deloitte Consulting director, Eugene de Klerk.

“Gas prices are set to remain at historic low levels for the next three decades and are set to reduce the cost of energy, which will force steel companies worldwide to rethink their business model, as 40% of its costs are energy related.”

He adds that, although coal was cheaper to use in the production of iron, using a direct reduced iron (DRI), this has now changed owing to the availability of gas and cheaper prices for each ton of iron produced.

Citing a Deloitte report, ‘The Remaking of the Global Steel Industry: Lower Cost Natural Gas and Its Impact’, De Klerk notes that most steelproducing countries that use gas to manufacture steel are set to benefit from a 30-year outlook of low gas prices. The use of gas instead of coal in the DRI stage of steel production leads to a higher quality of iron in the steel making process. The price of gas-produced DRI, compared with coal produced DRI, has been higher since the early 2000s. However, this changed in 2010, when gas-produced DRI dipped below coal-produced DRI at $50/t of crude iron. This lower price trend is set to persist well beyond 2030.

Click here to read the full article . . . .  South African steel industry needs protection policies

If you have any questions or would like a more detailed discussion, contact Eugene de Klerk at edeklerk@deloitte.co.za


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