Ray Smuts
THE IMPRESSIVE R5,5 billion Saldanha Steel plant, thought once by many to provide the answer to rampant unemployment and bring new-found prosperity to the Cape West Coast, is in dire straits as it labours under huge debt, low steel prices (just under R1 400 for a ton of hot rolled coil at the time of writing) and the US threat of outrageously high duties.
Saldanha Steel is owned 50-50 by Iscor, the listed steel and mining group, and the Industrial Development Corporation. Were it to shed its debt it could probably thrive as it is a technically fine mill producing some of the best steel in the world.
Iscor, very much upbeat about long-term prospects for Saldanha Steel, has agreed to plough some
R2 billion into the company and seeks a similar commitment from its partner, thereby reducing the debt to about R1,5 billion.
Sources close to the IDC are reported as saying the corporation would prefer to reduce its exposure to steel - comprising more than 60% of its book - thereby obviating the need to inject a further R2 billion into Saldanha Steel.
The United States, South Africa's biggest market for hot-rolled steel, is seeking to impose duties of nearly 100% on steel from this country and from ten others which they claim are killing local (US) steel firms. Saldanha Steel is trying to persuade the US International Trade Commission not to impose the import duties.
What seems clear is that seeing Iscor and the IDC both gave birth to Saldanha Steel, they equally have a duty to rescue it.
Unless it can come up with an investor to match its partner's financial commitment, the IDC simply cannot walk away leaving Iscor to hold the baby, as it were.
Copyright Now Media (Pty) Ltd
No article may be reproduced without the written permission of the editor
To respond to this article send your email to joyo@nowmedia.co.za
