One of South Africa’s biggest steel pipe producers blames Eskom and cheap Chinese imports, among other factors. Tiso Blackstar said it would write off its R137.6 million investment in Robor.
The 90-year-old Robor, once one of Southern Africa’s largest suppliers of steel, tube and pipe, has closed its doors resulting in the region of 900 employees looking for new positions.
Tiso Blackstar, which holds a stake of almost 48% in Robor, blamed its demise on the weak state of the economy and cheap Chinese imports, among other factors.
In addition, delays in the signing of Independent Power Producer agreements with the South African Government and the well-publicised financial demise of Eskom have caused systemic harm to both production and revenue generation in South Africa’s steel tube and pipe manufacturing sector, Tiso said.
It also said that new US import duties on imported steel, hurt Robor’s sales of specialised steel pipe into the US oil and gas industry, previously a lucrative export market. Eskom’s decision to stop a planned 5 000km investment in additional power transmission lines, an initiative in which Robor had invested extensively, also hit the company.
Tiso also blamed government for not extending import duty and tariff protection to downstream industries, “thereby exposing steel fabricators to huge margin erosion to compete with imported steel-manufactured goods”.
Germiston-based Robor has seen a sharp slump in volumes over the past 18 months, and despite restructuring, cost-cutting and new deals with credit providers, these have not been enough to stop the company’s decline.
“In addition, the company explored numerous avenues to raise additional capital for Robor including selling Robor as a going concern, merging with a competitor and a break-up and sale of individual Robor group companies.”
“Regretfully, despite all efforts to right-size Robor’s operations, to procure additional tonnages for Robor’s world-class manufacturing facility and to source additional capital, Robor became increasingly unable to maintain the required levels of working capital and liquidity to retain its going concern status.”
In December 2017, Tiso Blackstar had disposed of a 3.4% interest in Robor for R16.5 million, reducing its interest from 51.0% to 47.6%, which resulted in a loss of control and step down from a subsidiary to an associate.
Tiso Blackstar says it was unable to commit any further capital to Robor.
Robor’s directors and shareholders unanimously passed resolutions for the winding-up of Robor. The South Gauteng High Court granted the order of liquidation of Robor at the end of September.
In 2018 Robor got to merge with a competitor – Macsteel Tube & Pipe – which was allowed under the “failing firms” principle. Today neither Robor, nor its competitor Macsteel Tube & Pipe exist. The companies supplied pipes for water supply, tube for structural engineering applications, hi-tensile scaffolding, mine support systems and precision tubing in general.
Robor was one of a diminishing pool of South African companies that remained sufficiently competitive to export its product, in its case to the US. Its galvanised pipe factory was considered among the top three in the world. The institutional knowledge that has been lost with the closing of those doors cannot be recovered.
Steeledale, part of the black-women led Kutana Steel Group, has also applied for business rescue. And before the end of this year, Macsteel, one of SA’s biggest steel suppliers with more than 7 000 customers, will close at least eight of its 40-odd branch offices, losing about 300 jobs in the process. In five years Macsteel has halved its workforce, decreasing from 5 500 employees to just over 3 000.
“The job losses in the downstream sector over the last five years are significant. About 10 000 jobs have been shed just by five to six companies. Most companies are operating on four-day weeks and further retrenchments are planned. This is nothing new. The steel industry has been in decline since 2014. We keep thinking we are at the bottom, and we realise we are not, so we have to rejig some more. By now, the industry may have passed its tipping point,” said Paolo Trinchero, CEO of the Southern African Institute of Steel Construction in a news report.
“The Chinese businesses have come in with ridiculous pricing, often below production cost, just to buy the market. The writing was on the wall when we, as the largest reseller of tube and pipe, found we could buy product cheaper than the base cost of production. There is a war out there to achieve the next sale,” says Mike Benfield, CEO of Macsteel in the same report.