Acerinox Backs South African $100 Million Stainless Steel Expansion

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Researched by Industriaslinfo.com (Industrial Information Resources Incorporated; Houston, Texas). Columbus Steel (Randburg, South Africa) has announced that it will be investing in a new cold-rolling mill at its Middelburg, South Africa complex as part of a $100 million development plan. The new mill will almost double cold-rolling capacity from 270,000 tons per annum to 400,000 tons per annum. This addition to the two existing cold-rolling plants at Middelburg fulfills the original plan when the facility was first built.

Acerinox (Madrid, Spain), the Spanish steel major, bought a 64% stake in Columbus in January 2002 in a $235 million deal. The founding investors Highveld Steel and Vanadium (JES:HVL) (Witbank, South Africa), the national Industrial Development Corporation (IDC), and Samancor (Anglo American 40%, HBP Billiton 60%) (Johannesburg, South Africa) each retain 12%. Acerinox, with global options, judged Columbus to be the most attractive site for this expansion. Columbus is performing above expectations. The operation has shown good profitability since the end of 2001 and the investment in the new mill will be funded mainly from positive cash flow plus a certain amount of borrowing. Shareholders will not be asked to contribute. The shareholders see a relatively modest investment bringing good returns.

In addition to the new cold-rolling mill the investment package will include the upgrade of facilities and modifications to steel softening and descaling operations. A new slitting line to customize the width of stainless steel coils will also be built at the Middelburg plant. The expansion will cater to the growing needs of the domestic market and should be operational in the last quarter of 2004. Current production and delivery levels will not be affected.

The expansion at Columbus will probably curtail plans by Ferrostal to develop a new stand-alone cold-rolling stainless steel plant that could have been sited at the new Coega IDZ and industrial zone and port near Port Elizabeth on South Africa's East coast. Ferrostal is still expected to invest in downstream beneficiation plants for stainless steel in the region. Coega is waiting for the final confirmation from France's Pechiney, which has indicated plans to build a state-of-the-art aluminum smelter in the zone. See associated article: Pechiney Opts-in as Work Starts on South Africa's $3 Billion Coega Port