The Impact of Steel Shortage on SEIFSA Member Companies: Survey Results and Engagement Feedback


As the voice of employers in the Metals and Engineering (M&E) sector, the Steel and  Engineering Industries Federation of Southern Africa (SEIFSA) has been tirelessly  engaging with the South African Government and other relevant parties to find solutions to the challenges the Metal and Engineering is experiencing as a result of not only the COVID 19 pandemic and the national lockdowns to curb its spread, but also the now seemingly  perennial challenges faced by many businesses, such as the high cost and unreliability of  South Africa’s power supply, reduced demand for our products and rising imports.  

SEIFSA was alerted to the critical shortage of steel in the country being experienced by its  member companies and decided to engage with a key primary steel supplier and the South  Africa Government through the Department of Trade, Industry and Competition on how to  resolve this challenge.  

In order to ensure a constructive engagement, SEIFSA conducted a survey from its  member companies, to understand the impact the steel shortage has had on operations,  with the survey’s closing date being Monday, 22 February 2021. 

The following questions were posed to the member companies: 

  • Has your business experienced any shortages of steel? 
  • If yes, which steel products have you experienced a shortage of? 
  • When did you start experiencing this shortage? 
  • Did the supplier communicate the reasons behind the shortage of steel products? What has been the impact of the steel shortage on your business? 
  • What has been your approach in addressing the shortage for your business? If you had the opportunity to engage with your supplier, what would be your proposal  to find a solution to this shortage?
  • If you had the opportunity to engage with the Department of Trade, Industry and  Competition, what would be your policy suggestion around the steel shortage? Do you have any other comments that need attention with regards to the steel  industry? 


2.1 Has your business experienced any shortages of steel? 

According to survey results, 98.5% of the respondents indicated that they had experienced  shortage of steel, with only 1.5% indicating no, as demonstrated in the figure 1: Figure 1: Companies experiencing shortage of steel 

Source: SEIFSA Survey Feb 2021 

2.2 Steel products where shortages are being experienced 

A number of steel products varying from flats and long steel, were listed by the various  companies, with the dominant steel products in shortage being galvanized products, hot  rolled steel, cold rolled steel and sheets, among others. 

2.3 Period when shortages started being experienced 

According to the percentage responses received, the bulk of the steel shortages  experienced by many companies was during the fourth quarter of 2020, with 56% of the  companies having felt the high impact as depicted in figure 2. It is to be noted that this  increase was as a result of relaxed lockdown measures, with demand exceeding  ArcelorMittal South Africa’s supply, as the primary producer had not resumed its blast  furnaces to full capacity. 

Figure 2: Period when shortages of steel were being experienced 

Source: SEIFSA Survey Feb 2021 

2.4 Communication from supplier on the reasons behind the shortage of steel

According to the survey results, 79.1% of the respondents indicated that the supplier  communicated on the shortages of steel amid the regular engagements with the Sales and  Marketing team at ArcelorMittal SA (AMSA), with 20.9% indicating no communication from  the supplier, as depicted in figure 3. 

Figure 3: Communication from supplier on reasons behind steel shortage 

Source: SEIFSA Survey Feb 2021 

2.5 Impact of the steel shortage on your business 

In terms the impact that the shortage of steel had on businesses’ operations, the situation  varied across companies. However, the disruptions caused to the production was evident.  Over 40% of the respondents indicated major disruptions in production, supply and longer  lead times. There were also companies that opted to retrench their workforce, as depicted  in figure 4. 

Figure 4: Impact of steel shortage on business operations 

Source: SEIFSA Survey Feb 2021 

2.6 Approach in addressing the shortage for your business 

A number of companies took some strategic decisions to deal with the shortage of steel.  These decisions included the following actions: 

  • Buying extra stock; 
  • Using alternative steel, where possible; 
  • Importing steel, even though tariffs were high; 
  • Increased stock holding; 
  • Manufacturing with available material; 
  • Extensive networking for alternative supply; 
  • Prioritizing production; 
  • Used alternative sources, but at high cost; 
  • Reduced confirmed order supply; 
  • Increased stock on hand (intermediary parts and raw materials); 
  • Overstocked; 
  • Absorbed price increases; and 
  • Product design changes. 

2.7 Proposal to supplier to finding a solution to the steel shortage

Several proposals were put forward to the supplier in dealing with the shortage. These  proposals included: 

  • Suppliers should source material overseas; 
  • Regular maintenance of furnaces; 
  • Local production must be able to satisfy local demand; 
  • Be competitive; 
  • Increase production; and 
  • Offer reasonable stock prices. 

2.8 Any other comments that need attention with regards to steel industry in SA

In the responses by companies on other matters that need attention, the following stood  out: 

  • The quality/output of AMSA is getting worse and needs more attention; Regulation needs to be fair and create a competitive market; 
  • The issue of steel shortage requires urgent attention since it is opening doors for  international competitors; 
  • Transformation of the industry is required to increase the participation of small to medium enterprises; 
  • The critical shortage of material will be the single biggest cause for medium-sized  companies to close down, since South Africa experiences a monopoly in the supply  of material; 
  • The steel industry has promised to make up the supply shortfall, but so far this has  been unsuccessful; 
  • Either create incentives for the industry to get cheaper steel or for exporting local  manufactured products; 
  • More companies want to purchase products that are manufactured in South Africa  rather than importing them, but the Government does not incentivize them to do so; Government needs to intervene to assist in boosting the economy by keeping  manufacturing in-house; 
  • The unstable increases of steel prices need to be addressed; 
  • The impact on mining customers’ needs should also be addressed urgently; Clear communication to help define future risk is required; 
  • Steep price increases, coupled with uncertain supply, are simply the issue at hand;  Employee costs appear to be the highest of all industries in South Africa;
  • Enormous steel prices increase should be addressed; and 
  • Improving manufacturing capacity and competitiveness. 

2.9 Policy suggestions to the Department of Trade, Industry and Competition (DTIC)

Suggestions being proposed to the DTIC are the following: 

  • Remove import duties and levies; 
  • DTIC to engage all stakeholders and plan how to keep the steel supply constant in  South Africa; 
  • Afford opportunities of alternative sources of supply; 
  • Allow imports and keep pricing in the market competitive; 
  • Open more local mills; 
  • Curb steel import flood from China; and 
  • Ensure that the local steel industry has proper sustainable plans to upgrade to new  technology to reduce steel production price. 


A committee comprising the following individuals met with AMSA CEO Kobus Verster at  AMSA Head Offices in Vanderbjilpark on 24 February 2021: 

  • SEIFSA CEO Kaizer Nyatsumba; 
  • SEIFSA Chief Economist Chifipa Mhango; 
  • DEFY CEO Evran Albas; 
  • Reinforcing Steel Contractors (Pty) Ltd Shareholder and Operations Director Ernest  E Volschenk; and 
  • Structa Group Director Carlo Martemucci. 

In the meeting, Mr Mhango presented the findings of the survey results, following which  there was engagement on the key identified matters. 

The following were the highlighted responses from ArcelorMittal SA: 

3.1 The matter of closing ArcelorMittal SA 

Steel is a significant and integral part of the industrialisation process and is important in  infrastructure development for any economy. Having a primary steel producer in our own  economy works to the advantage of the economy, hence the presence of producers such 

as AMSA is very key. It takes away the frustration of importing; on average, it can take up  to three months for stock to arrive in the country, despite its origin. 

3.2 The challenges of AMSA’s capacity to supply 

During lockdown level 5 in March 2020, production was stopped totally. This meant switching off the blast furnaces. As lockdown measures were being relaxed into the year  2020, production resumed. However, it should be noted that a blast furnace is not like an  oven. It takes about six to eight weeks for the furnace to heat up when it has been off. That  caused supply problems for AMSA as demand outpaced supply as feeder market  segments in the downstream also resumed operations under more relaxed lockdown levels  later in the year.  

3.3 The issue of steel prices 

A key fact about steel prices is that these are internationally priced. Globally, steel prices  increased by almost 50% during this period. This trend is similar to that of most commodity  prices. AMSA’s prices are monitored by the Government as part of the agreement entered  into when import tariffs were initially put in place. The price basket of countries being  followed by AMSA to set prices has a formula, and the factors have followed international  price trends.  

3.4 Remedies on ability to supply steel material to meet demand

AMSA has indicated that normal supply of flat steel products will be achieved by the end  of March 2020 since the company is currently producing more than it normally does per  month in order to address the lag caused by the lockdown. As for long steel, the blast  furnace is going through maintenance, which is normal. AMSA gave the assurance that  supply will also return to normality by June 2020, with a similar approach to producing more  than normal monthly. 

3.5 Concerns about quality of steel  

AMSA was adamant that the quality of steel being supplied to its customers cannot be  compared to imported steel. Mr Verster said AMSA meets SABS compliance standards  and has been tested on key national projects. Therefore, AMSA argued that this concern  by some customers was not based on facts.

3.6 Communication with customers 

AMSA has indicated that regular communication takes place with its customers through its  Sales and Marketing team. Mr Verster said AMSA customers had forecast low demand  during the 2020 lockdown, hence the company decided to reduce its production capacity. 

3.7 ArcelorMittal SA importing from its other countries’ operations 

AMSA indicated that lockdown measures were also implemented in other countries, hence the supply situation in those countries was similar to that which obtained in South Africa. Mr Verster said at this stage there is no extra capacity across its other countries’ operations  for the company to import. He argued that, in fact, importing will not address the challenges  since it takes longer for t products to land in the country. He said that, on average, the  waiting period is three months. 

4. Conclusion 

Following the engagement with AMSA, we are encouraged that solutions to the challenges  experiences by the sector are being implemented. AMSA has committed to ensuring  normalization of production supply by the end of March 2021 for flat steel products, with  long products supply to be normalized by the end of June 2021. This will be done with  increased monthly production to address the backlog. 

AMSA has also committed to continue communicating with its customers as it deals with  the concerns which have been raised, some of which just require customers to understand  its’ pricing model better, which is based on a basket of international steel prices from developing and developed countries. As such, the price trends are aligned to international  prices, which have increased by 50% from 2020, while AMSA’s prices increased by an  average of 45%. 

The meeting concluded with a proposal for AMSA to issue communicate more frequently  with downstream fabricators, including through SEIFSA’s channels, on the progress being  made to deal with steel shortages. 


Kaizer M. Nyatsumba                       

Chief Executive Officer

Chifipa Mhango

Chief Economist