11 Sep IDC, China sign iron and steel deal
The South African Iron and Steel Project takes a significant step forward as the Industrial Development Corporation of South African and China’s Hebei Iron & Steel Group sign a Memorandum of Understanding.
The South African Iron and Steel Project took a significant step forward today with the signing of a Memorandum of Understanding (MOU) between the Industrial Development Corporation of South African (IDC) and China’s Hebei Iron & Steel Group (HBIS) in Beijing. The two will co-operate on developing the project.
The IDC completed a pre-feasibility study for a new low-cost iron and steel facility based on available low-cost resources in South Africa. The total estimated cost for phase one of 3-million tons is estimated at $2.7-billion, with the second phase of 2-million tons of products estimated at $1.8-billion, bringing the total cost of the two phases to $4.5-billionfor 5-million tons.
Hebei will partner with the corporation to conduct a detailed feasibility study for a greenfield steel plant.
The Minister of Economic Development, Mr Ebrahim Patel, today welcomed the signing of the MoU.
“We need to increase the level of competition among local producers of steel, to help lower the prices of this critical input into industrialisation and avoid monopoly pricing. This agreement is a first step to look at the feasibility of a steel project that the IDC is working on,” Patel said.
He said: “If successful, it can help to expand capacity, process local minerals in South Africa, support sustained economic growth, job creation and youth employment. Local industry needs competitively priced inputs.”
Early this year, the IDC and a Chinese consortium led by HBIS, with three other groups, including China Africa Development Fund (CAD), acquired Palabora Mining Company in South Africa, leading to a sound business partnership between the two and forming the basis for increased co-operation, according to IDC chief executive Geoffrey Qhena.
“This MOU is specifically to undertake and complete a detailed feasibility study. Once this process has been completed – and depending on a positive outcome of the study – we intend to commence with the establishment of the South African iron and steel company,” he said.
The demand for iron and steel in South Africa and surrounding markets is growing, creating huge potential for the development the industry. In addition, the continent is showing good growth potential, driven by investment in infrastructure, energy, mining and construction – all of which is expected to drive steel demand in the medium to long-term.
South Africa offers access to competitively-priced raw material input, good infrastructure and within a rapidly growing region. “We expect this project to benefit from the projected market growth. The facility will meet world-class operational, environmental and safety standards while meeting the financial returns expected by the shareholders,” said Qhena.
“Growth in South Africa’s downstream steel processing and fabrication industry is currently constrained by uncompetitive steel prices and unavailability of certain steel products. The downstream steel processing sector is highly labour-intensive and thus has the capacity to create significant jobs. It is our view that an efficient steel-making facility is capable of supplying steel at competitive prices to stimulate growth in the downstream steel sector.”
HBIS brings to the table expertise and a proven ability to operate steel-making facilities. The IDC has the necessary knowledge of the local and regional operating environment. CAD Fund, which already has presence in the region, is also expected to provide financial support.
HBIS representatives at the signing were Yong Yu, the chairman; Zhaofeng Peng, the general manager; Guiyang Li, the vice-chairman; and, Zhensuo Liu, the chief financial officer. CAD Fund representatives were Qingcheng Lu, the vice-chief executive officer; Qing Yu, the vice-manager of the investment department; Yufeng Liu, the manager assistant of the investment department; and, Dan Han, the manager of the law department.
Representing South Africa was Mr. GLP Munyai, the minister economic in the embassy in Beijing, and Mr. Qhena, who led the IDC delegation, which had attended the World Economic Forum in Tianjin.
HBIS is a large, state-owned iron and steel group company established by the Hebei provincial government. Its principal business is the production of iron and steel; it has interests in natural resources, manufacturing, finance and logistics.
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