The South African steel industry is navigating turbulent times, shaped by global market pressures and internal economic challenges. Shrinking demand, rising competition from imports, and logistical inefficiencies are undermining local production. Notably, ArcelorMittal’s recent closure of long-steel plants in Gauteng and KwaZulu-Natal has heightened concerns over the sector’s viability.
Global steel market trends
The global steel market is facing a perfect storm of oversupply and weakened demand, with China at the epicenter. The world’s largest steel producer has significantly reduced its appetite for raw and processed variants, impacting international and local prices. Simultaneously, South Africa’s steel industry is struggling to compete with cheaper Chinese imports, putting immense pressure on local producers.
"It is going to be very difficult for South African companies to compete with China’s steel products, as they are currently cheaper than those manufactured locally," says Aroni Chaudhuri, Chief Africa Economist at Coface.
The ripple effects extend beyond primary steel production, threatening industries that heavily depend on stainless steel products, including automotive manufacturing, cookware, and cutlery production. As China continues to transition its economy toward less steel-intensive industries, South Africa must prepare for a future where Chinese demand is more uncertain.
On a global scale, Coface forecasts a steel production increase of less than 1% year-on-year in 2025 (+0.3% y-o-y in 2024). While steel production is expected to remain resilient in certain developing economies such as India —the world's second-largest steel producer— risk factors persist due to the softening macroeconomic environment and key sectors like construction. The effects of the new US trade barriers remain uncertain. Global steel consumption is projected to decline further by 1% y-o-y, following -0.2% y-o-y in 2024 and a contraction of 1% in 2023. Consequently, the average steel price for 2025 is forecasted to remain around USD 600 per ton, close to 2024 levels.
Nickel and stainless steel dynamics
Stainless steel prices have mirrored the decline in basic steel, driven in part by fluctuating nickel prices. The weakened demand for stainless steel in local and export markets has exacerbated the challenges facing the sector, necessitating strategic shifts to maintain competitiveness.
Local challenges in South Africa
The South African steel industry’s challenges are multifaceted, driven by both supply and demand issues. Energy crises, failing infrastructure, and supply chain disruptions have eroded profitability. On the demand side, low output from key sectors such as construction and automotive manufacturing compounds the strain.
The Government of National Unity (GNU) is urged to address these structural challenges by prioritising rail and port infrastructure rehabilitation. Restoring the functionality of critical logistics networks could rekindle demand for steel products, especially if paired with large-scale infrastructure projects.
"The GNU should revive the local rail system and make haste in bolstering local demand for the steel and stainless steel industry by implementing large-scale and much-needed infrastructure repair or development projects," Chaudhuri advises.
He emphasises that the rail network is a notable starting point because it is "simply the most efficient land transport for any kind of heavy material, mineral, or metal: it is absolutely critical to have a functional rail network."
Economic and policy factors
The economic landscape compounds the difficulties faced by steel manufacturers. High interest rates deter investment in real estate, while limited fiscal space constrains government-led initiatives in infrastructure investment. Promoting public-private partnerships is vital to mobilise resources and foster long-term sustainability.
Furthermore, it is crucial to boost local demand by addressing deindustrialisation and revitalising infrastructure projects, particularly in the rail sector, which remains essential for transporting heavy raw materials efficiently. This strategy would not only support the steel industry but also generate employment and economic momentum.
"By continuing to promote a reform agenda aimed at correcting the long-standing structural issues of the economy and achieving higher medium-term growth, the government could help generate local demand for household appliances, as well as real estate and infrastructure investments, which would boost the economy while bolstering the metals sector," Chaudhuri notes.
Future outlook: Exploring export opportunities
Despite current challenges, the African Continental Free Trade Area (AfCFTA) presents potential growth opportunities. Targeting emerging markets within Africa, such as Tanzania and Kenya, could help South Africa’s steel industry find new demand as the continent pursues infrastructure-driven economic development over the next few decades.
"Going forward, South Africa must identify markets to which it can export steel and stainless steel products," Chaudhuri suggests. "The AfCFTA may yet prove a key instrument for the local stainless steel industry."
Additionally, diversifying export markets and fostering public-private collaborations could strengthen resilience, enabling the industry to better weather global uncertainties.
Where to from here?
South Africa’s steel industry stands at a crossroads, with a need for adaptive strategies to overcome internal inefficiencies and global pressures. By revitalising local infrastructure, leveraging partnerships, and exploring continental export opportunities, the sector can navigate the complex landscape and pave the way for future growth.
