Shortage of building, construction material hits SA

13 Nov, 2020 - 00:11 0 Views

eBusiness Weekly

Critical shortages of building and construction materials, including cement, steel, bricks and timber, are suffocating the sector’s recovery from the Covid-19 lockdown and diminishing its impact on the recovery of the economy.

David Metelerkamp, senior economist at construction market intelligence firm Industry Insight, said the shortages, if they continue for an extended period of time, have the potential to derail government’s planned massive infrastructure investment plan to stimulate the economy post the Covid-19 lockdown.

David Metelerkamp, senior economist at construction market intelligence firm Industry Insight, said the shortages, if they continue for an extended period of time, have the potential to derail government’s planned massive infrastructure investment plan to stimulate the economy post the Covid-19 lockdown.

Metelerkamp said the shortages are probably demand-driven “to a degree” because the construction industry will be one of the better performing sectors in the economy this year as all the other sectors are in deep recession.

“But the construction industry is one of the only sectors that the government can play that counter-cyclical role in, because more than half of the sector is funded by government money.

“The effect (of the shortages) then is really negative because it’s going to limit the ability of government to play that counter-cyclical role if [the shortages] are going to completely slow down projects,” he said.

Protections

Despite their inability to meet the current demand, the steel industry benefits from tariff protection on imports, while the cement industry has submitted an application to the International Trade Administration Commission for protection against imported cement.

Moneyweb is in possession of a copy of the letter by a major wholesaler of building and construction materials that highlights the shortages in various products.

The managing director of the company (neither want to be named), advises clients that it is battling to source sufficient stocks of steel products; bricks, particularly stock bricks; cement and cement-related products including lintels; timber, with certain sizes difficult to obtain; and many imported products, including plumbing, power tools and electrical products.

The company said ArcelorMittal South Africa cannot supply the South African demand and steel is now being imported, but it takes three to four months to arrive and will be much more expensive.

Cement capacity

It added that there are severe cement capacity problems throughout the country, while the lead time at present for the supply of bricks is between two and four weeks.

The cement shortage has been exacerbated by transport problems caused by industrial action.

However, Heunis Steel MD Anton Heunis said the steel shortage has been caused by ArcelorMittal failing to start up its second blast furnace after the easing of lockdown restrictions.

Heunis said it alerted ArcelorMittal to the shortage in June, but ArcelorMittal decided to “stick to their guns” and also failed to import hot rolled coil and coat it locally.

“It’s basically a lack of proper management. They just didn’t manage the thing properly and now there is a backlog and they are trying to catch up.”

Imports

Heunis said his and other companies had to start importing steel from China and other countries, adding that ArcelorMittal will be starting up its second blast furnace in December “which is too late”.

Heunis questioned what motivates ArcelorMittal to improve the company and its management “when they have got the protection of the government even if [they] are useless”.

The Concrete Institute (TCI) MD Bryan Perrie said there are a number of compounding factors that are leading to cement shortages, including transport problems with Transnet Freight Rail and industrial action affecting trucking companies, plus problems with the supply of fly ash from Eskom.

Demand not anticipated

PPC South Africa MD Njombo Lekula said nobody anticipated the current demand for cement when the lockdown was implemented and nobody knows if the current demand will be sustained into the future.

Lekula said PPC continued to supply its clients and delayed the maintenance shutdown of its plants where possible to accommodate the growing demand, even while running at 50 percent capacity at Level 4 of the lockdown.

Lekula stressed the issues around supply are related to factors outside the control of the cement industry and are, in PPC’s view, temporary.

He added that this has not changed PPC’s views on the support required for a sustainable local clinker and cement manufacturing base.

“Through the TCI we continuously engage the relevant government institutions on aspects that may have an impact on the industry and its ability to support the infrastructure projects.

“For instance, we are currently engaging the government on the issues of TFR (Transnet Freight Rail), which has continued deteriorating post the lockdown and is seriously impacting the movement of the materials,” he said.

Lekula added that PPC is now benefitting from its national footprint and the fact that it had idle capacity.

But industrial action impacting on trucking companies has had an effect not only on the outbound movement of bulk cement but also on the inbound movement of fly ash from Eskom to PPC production sites.

But Lekula said they could partially mitigate this impact by repositioning bulk cement transport from other parts of the country.

‘Extraordinary times’

“We need to acknowledge that we are in extraordinary times that requires understanding and patience.

“In our view, the local industry can sufficiently supply the market. PPC estimates SA cement capacity at 20 megatonne, active capacity at 15T, while cement demand is below 13,5T.

“Following a pessimistic view about the post-lockdown economy, we were pleasantly surprised by an unexpected increase in demand.

Bricks

A director of a Gauteng-based brick manufacturer, who did not want to be named, attributed the shortage of bricks to the Covid-19 lockdown and the fact that brick manufacturers were initially able to sell but not produce bricks as the various levels of the lockdown regulations were lifted.

This has resulted in the sale of their buffer stock of bricks and they are now experiencing difficulty in producing sufficient bricks to meet the demand, he said.

Clay Brick Association of SA executive director Mariana Lamont confirmed that there is currently a shortage of bricks after manufacturing stopped for three months during the lockdown.

Lamont said when brick manufacturers could start up again from July, none of them anticipated that “construction would jump away at a very positive level”, particularly as the pre-lockdown environment was not positive and supply exceeded demand.

“Then there was the lockdown and a sudden boom.

There is a very good increase [in demand] and it’s across the country . . . and not Gauteng-specific,” she said.

Lamont said the supply pressure on brick manufacturers applies equally to small and large manufacturers, because none of them were manufacturing during the lockdown and manufacturing bricks is a four- to six-month process.

“But there is a very good feel about 2021,” she said. “Order books are full for January and February.” — Moneyweb.

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