Plans for Chinese steel project in Limpopo

15 September 2014

Trade and Industry Minister Dr Rob Davies confirmed on Friday that China’s Hebei Iron and Steel Group would partner with the Industrial Development Corporation (IDC) on the development of steelmaking capacity based on raw material available near Phalaborwa, in Limpopo. The project would initially seek to produce three million tons pa.

Hebei and the IDC had signed a memorandum of understanding outlining the Chinese steel group’s intention to take a 51% stake in the steel mill, which could begin production by late 2017. Construction on the project was scheduled to begin in 2015.

The plant, to be part financed by the China-Africa Development Fund, should produce five million tons of mostly construction steel by 2019.

Hebei already owned iron-ore and copper mining assets in South Africa.

IDC, also part of that consortium, was keen to add value to the large stockpile of iron-bearing magnetite material on surface at the Palabora mine.

Davies said the magnetite dumps could yield smaller-scale steel plants, but that such mills would be supportive of government’s ambition to increase competition in the South African iron and steel sector – rivalry that the DTI hoped would also help lower domestic prices.

The DTI and South Africa’s largest steel producer ArcelorMittal South Africa (AMSA) had been at loggerheads over pricing for a number of years.

The Wall Street Journal reported that China, home to 43% of the world’s steel production, was pushing steelmakers to consolidate and that Hebei had come under pressure for “contributing to excessive industrial capacity and environmental pollution”.

“Locating steel plants overseas would conform with the government’s encouragement for State-owned companies to venture more aggressively abroad, which includes Chinese moves in recent years to cultivate a strategic relationship with African nations,” the newspaper wrote.

By Terence Creamer
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