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R 031207Z NOV 08
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RHEBAAA/DEPT OF ENERGY WASHINGTON DC
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RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

UNCLAS SECTION 01 OF 04 PRETORIA 002402 
 
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E.O.   12958: N/A 
TAGS: EPET ENRG EMIN EINV EIND ETRD ELAB SF
SUBJECT: COLUMBUS STAINLESS STEEL AND ASME NUCLEAR STANDARDS 
WORKSHOP 
 
¶1.  (SBU) SUMMARY: The U.S. Embassy supported the American Society 
of Mechanical Engineers (ASME) Nuclear Codes and Standards Workshop 
in Johannesburg, which successfully promoted Westinghouse's bid for 
significant new nuclear build in South Africa (septel).  Delegates 
visited Columbus Stainless Ltd., Africa's only stainless steel 
production plant and an aspiring supplier to the potential South 
African and global nuclear industry, on October 9.  Columbus is a 
fully-integrated, high-tech plant developed by Spanish stainless 
steel giant Acerinox S.A.  The plant is currently operating at 30-40 
percent of capacity due to global financial turmoil and the drop-off 
of export orders, particularly from China and Asia.  End Summary. 
 
-------------------------------------------- 
ASME Workshop on Nuclear Codes and Standards 
-------------------------------------------- 
 
¶2.  (SBU) Columbus Stainless Ltd. is Africa's only stainless steel 
plant and is one of three plants owned and operated by Spanish 
stainless steel giant Acerinox S.A.  Minerals and Energy Specialist 
toured the Columbus plant in Middelburg, Mpumalanga as the final day 
of the ASME Nuclear Codes and Standards Workshop held in 
Johannesburg on October 7-9, 2008 (septel).  The program was a 
cooperative initiative promoted by U.S.-based ASME (American Society 
of Mechanical Engineers) and the Johannesburg-based U.S. Commercial 
Service in support of Westinghouse's bid for new nuclear build and 
the potential localization and globalization of the South African 
nuclear industry. 
 
¶3.  (SBU) The SAG plans to construct an ambitious 20,000 MW of new 
nuclear power capacity over the next 20 years.  The initial tender 
is for 3,000 MW, representing two-three individual reactors.  The 
larger fleet is intended to comprise a mix of conventional 
pressurized water reactor (PWR) plants and locally-developed Pebble 
Bed Modular Reactor plants of 165 MW each.  The ASME workshop was 
co-sponsored by Westinghouse and Areva of France, which are the two 
preferential bidders for the supply and construction of the 
conventional PWRs. 
 
¶4.  (SBU) Some 400 delegates from South Africa's supplier and 
services industries attended the ASME workshop, showing strong 
interest from potential nuclear suppliers in adopting ASME 
standards.  ASME is a U.S.-based, independent organization that sets 
globally-recognized performance, testing, safety and numerous other 
codes and standards for engineering structures and products.  ASME 
also provides testing services that enable products manufactured and 
built under local or other international codes and standards to be 
certified compliant with ASME standards and codes.  The workshop 
covered most aspects of ASME's work and the requirements for 
potential certification of South Africa's Pebble Bed Modular Reactor 
power plant now under development, plus products used in a nuclear 
plant that may be exported. 
 
---------------------- 
Global Stainless Steel 
---------------------- 
 
¶5.  (SBU) The global long-term growth rate for stainless steel has 
averaged more than 6 percent per year, equivalent to 1.7 million 
Qaveraged more than 6 percent per year, equivalent to 1.7 million 
tons of new steel each year.  Production for 2008 is estimated to be 
28-29 million tons.  Global production and South African exports of 
stainless steel in millions of tons are: 
 
 
Production 
Country        2008(6-mths)  2007        2006 
W Europe       4.862         8.669       9.972 
C-E Europe       194           364         363 
Americas       1.357         2.604       2.951 
Asia           8.344        16.200      15.074 
Total         14.776        27.836      28.359 
 
South African Exports 
       Total        Asia       W Europe   NAFTA 
2007   506,000      220,000    132,000    92,000 
2006   515,000      175,000    218,000    73,000 
 
PRETORIA 00002402  002 OF 004 
 
 
 
¶6.  (SBU) Stainless steel represents a family of chromium and 
nickel-containing alloys that are corrosion-resistant and retain 
tensile strength at high temperatures.  These alloys contain at 
least 11 percent chromium, which forms a chrome-oxide layer on the 
metal that makes stainless steel corrosion resistant.  This metal 
surface layer regenerates itself if damaged as long as oxygen is 
available.  The stainless steel family comprises four main branches 
and Columbus Stainless manufactures the two most commonly used 
types, namely ferritic and austenitic steels.  Ferritic steels 
contain 12-18 percent chromium, while the austenitic steels have an 
additional 8-10 percent nickel.  Some steels also have titanium, 
molybdenum, and other elements added in minor quantities to enhance 
properties such as resistance to pitting corrosion and 
stress-corrosion cracking. 
 
---------------------------------------- 
Columbus Stainless - Africa's Lone Plant 
---------------------------------------- 
 
¶7.  (SBU) Columbus Stainless is a technologically advanced, fully 
integrated operation, situated in Middleburg in Mpumalanga Province. 
 Columbus began life as a South African-owned, ferro-chrome smelter 
and was converted into a stainless steel plant in 1966.  Spanish 
stainless steel giant Acerinox bought a 64 percent share in 2002 and 
increased this to 76 percent in 2005.  Other shareholders are the 
state-owned Industrial Development Corporation (IDC) and private 
company Samancor, each with 12 percent.  Acerinox has spent about 
$310 million since 2002 to expand and upgrade Columbus' cold-rolling 
facilities.  It also has plants in Spain and Kentucky (U.S.) and 
produces some 10-11 percent of global stainless steel.  Columbus 
Stainless was catapulted into the major league of stainless steel 
producers by Spanish company Acerinox S.A.'s take-over of the 
company.  Acerinox invested $310 million to introduce new technology 
and skills into Columbus and to expand its capacity to produce 
world-quality, higher-valued, cold-rolled steel.  Columbus 
Management says that Columbus' productivity and steel quality is 
slightly below that of the Kentucky plant, but ahead of the Spanish 
mother plant, and still improving. 
 
¶8.  (SBU) Stainless steel offers unique properties needed in nuclear 
plants for piping and tubing in heat exchangers and for containers 
for the long-term storage of spent nuclear fuel and other highly 
radioactive materials.  Columbus intends to tender for the supply of 
stainless steel materials and components for the nuclear facilities. 
 It also seeks to have its products compliant with ASME codes and 
standards in order to market to the international nuclear industry. 
 
¶9.  (SBU) Columbus has the capacity to produce 1 million tons of 
stainless steel per year, but would require additional capital and a 
20-30 MW furnace to reach this production level.  Implementation 
depends on demand growth and the availability of power.  Columbus 
has a maximum cold-rolling capacity of 600,000 tons of value-added 
stainless steel and 150,000 tons of hot-rolled steel plate, both 
Qstainless steel and 150,000 tons of hot-rolled steel plate, both 
subject to demand.  Final cold-rolled products include coil 
(5.8-0.25 millimeters thick) and sheets in various lengths and 
widths.  A lower-value hot-rolled product is also produced as sheet, 
slab, or coil according to customer specifications.  Exports account 
for 80 percent of production.  Feed for the smelter consists mainly 
of some 600,000 tons of carbon-steel scrap, 250-300,000 tons of 
ferro-chrome supplied by the neighboring Samancor plant, and 
50-70,000 tons of nickel ingots supplied locally and from imports. 
 
--------------------------------------------- ------ 
Impact of the Global Downturn on Columbus Stainless 
--------------------------------------------- ------ 
 
¶10.  (SBU) Columbus' output has declined to 30-40 percent of 
capacity since August.  China was a major purchaser of stainless 
steel from Columbus prior to the Olympic Games, but has since not 
placed an order.  Columbus only produces on order and is therefore 
immediately affected by any downturn in economic activity. 
Discussions with management indicate that this cut in output is not 
the worst that the company has seen over its history and no layoffs 
are anticipated.  Management states that Columbus has not retrenched 
 
PRETORIA 00002402  003 OF 004 
 
 
staff in the last ten years, if ever.  The price of benchmark "304" 
stainless steel has dropped from $5,500 to $3,500 per ton over the 
last three months.  Nickel's price has dropped from $55,000 to 
$13,000 per ton during the same period.  At its peak price, nickel 
accounted for 70-80 percent of Columbus' production costs.  Much of 
the nickel is purchased on consignment and is costed using the LME 
price when consumed.  The current commodity downturn is expected to 
be short as China (and Asia) is likely to return to the market 
within the next few months.  Prices for stainless steel have fallen 
by some 36 percent, but Columbus is still profitable.  The 60-70 
percent volume decline is a concern, and Columbus is looking to 
increase penetration into Africa and to increase sales into the 
nuclear industry. 
 
--------------------------- 
The Stainless Steel Process 
--------------------------- 
 
¶11.  (SBU) Columbus management presented details of the stainless 
steel process.  Normal carbon steel scrap is melted in an electric 
arc furnace (EAF) with measured quantities of ferro-chrome and 
nickel, plus other "ingredients" as required to match the 
specification of the stainless steel product ordered.  The molten 
metal is refined and cast into slabs of 900 mm to 1,600 mm wide and 
200 mm thick, and then cut into lengths of between 4 and 12 metres. 
The slabs are hot-rolled at about 1,250 degrees Celsius to the 
desired thickness and then either coiled (black coil) or cut into 
plate (black plate).  Each coil weighs between 20 and 30 tons and 
the steel thickness can be between 8.0 mm and 3.0 mm.  Plate 
thickness ranges between 65.0 mm and 3.0 mm.  After a clean-up 
treatment, these products can be sold or cold-rolled to produce a 
higher-value product.  Cold rolling and finishing takes place on a 
heavy gauge cold mill to produce a smooth, shiny-finished, stainless 
steel.  The thickness range of the cold-rolled product is between 
5.8 mm and 0.25 mm.  The steel may be further treated to produce a 
brighter, flat surface or a bright, permanent finish.  The coils can 
then be cut and polished as required by the customer. 
 
 
--------------------------------------------- ---- 
Opportunities for Stainless Steel in South Africa 
--------------------------------------------- ---- 
 
¶12.  (SBU) Columbus management have identified specific growth areas 
within the South African market to grow the company's sales.  These 
include: 
 
-- the stadiums for the 2010 FIFA World Cup, where stadiums are 
being built from scratch and are steel-intensive; 
 
-- the rapid-rail (Gautrain) mass transit project as a significant 
user of stainless steel, plus other rail and rolling stock 
expansions; 
 
-- the power sector, where Eskom has a massive program to build new 
generation capacity, including two or three 4,800 MW coal-fired 
plants and new nuclear plants; 
 
-- the resource sector where new mines, plants, smelters and 
refineries are being established or planned, both in South Africa 
and elsewhere in Africa; and 
 
-- the manufacturing sector, including vehicle exhaust systems and 
Q-- the manufacturing sector, including vehicle exhaust systems and 
catalytic converters (currently at 15 percent of the global market) 
and bulk tank containers (which account for about 50 percent of the 
world's output.) 
 
¶13.  (SBU) Columbus is an eager potential supplier to the nuclear 
industry and graciously stepped up to offer a tour for delegates of 
the ASME Nuclear Codes and Standards Workshop.   This provided 
delegates an opportunity to observe challenges and opportunities in 
bringing South African industry up to ASME standards for the nuclear 
industry.  Columbus is not there yet, but they are making the effort 
and embraced the spirit of the ASME event. 
 
 
PRETORIA 00002402  004 OF 004 
 
 
LALIME