French oil giant Total’s decision to pull out of their planned Mozambique gas exploration project will have an unexpected trickle-down effect on South Africa steel industry.
Total pulled out of Mozambique by declaring force majeure (unforeseeable circumstances that prevented the company from fulfilling its contract) at its Mozambique liquid natural gas (LNG) project at the end of April.
The oil giant acquired a stake as operator from the Anadarko Petroleum Corporation two years ago. At the time it was Anadarko’s biggest foreign direct investment in Africa.
Rovuma is another significant LNG project affected, with US oil company ExxonMobil delaying its final investment decision until 2023, also due to the worsening security situation in the north of the country.
Operators of these two projects were expected to buy large quantities of South African steel, with a total in-plant steel structure tonnage estimated at 70,000 tons for Rovuma alone.
ALSO READ: Mozambique jihadist insurgency rocks regional stability
“We anticipated this tonnage would have been supplied by three to five fabricators, with at least one or two from South Africa,” says Simon Norton from the Africa Desk of the International Zinc Association (IZA). A galvanising facility for Mozambique was also planned.
The IZA Africa Desk has been monitoring the progress of the two Mozambican projects closely because it offered the potential opportunity to also increase the local uptake of refined zinc. The local uptake decreased from 86,000 tons in 2015 to 47,000 tons in 2020.
“We have 20% of the world’s zinc deposits, but we do not refine zinc any more after Exxaro closed the Zincor refinery in Springs at the end of 2011,” Norton says.
South Africa used to produce 110,000 tons of refined zinc a year to the value of about R4.3 billion, but from 2014 to 2019 imported R15 billion refined zinc.
ALSO READ: Mozambique to get military help from Portugal to help in jihadist fight
The South African government’s Steel Industry Master Plan 1.0, launched in October 2020, also focused on the two LNG projects in Mozambique.
The first draft of the plan emphasised the importance of improving investment, expanding and creating jobs, promoting local productive capacity via localisation and boosting export-orientated manufacturing or import substitution industrialisation in line with the National Industrial Policy Framework.
“We need to maximise African content in African projects. The IZA Africa Desk, in promoting the uptake of galvanised steel, has a larger role in getting other stakeholders involved to boost the local steel industry and South African industrial capacity.
“We must position South Africa as a source of engineering, technical expertise and experience for these projects, including the highest-quality raw materials and professionals,” Norton said.
Download our app and read this and other great stories on the move. Available for Android and iOS.
