The SA steel industry is a highly complex and diverse sector of the economy. It consists of large, primary steel producers such as ArcelorMittal SA, which produces steel from iron ore in blast furnaces; and Scaw and Cape Gate, which produce primary steel by recycling steel scrap in electric arc furnaces, and numerous foundries producing a range of products from steel scrap in induction and electric arc furnaces.
ArcelorMittal’s steel scrap costs will likely be a significantly lower percentage of total costs than that of Scaw and Cape Gate, whose primary raw material is steel scrap. In the foundry industry, steel scrap costs are a significantly lower proportion of total costs than in the primary steel sector, but their proportion of labour costs is much higher.
Capital costs are a function of the amount of technology investment. ArcelorMittal’s capital costs as a proportion of total costs are most likely lower than their competitors because they have failed to invest in new technology over the years. In the foundry industry, a similar capital diversity is found in which some have maintained their investment in modern equipment and technology and others have not.
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