Purchase of Columbus by Spain's Acerinox kills plan for cold-rolling mill offset project

Industrial Editor

A SPANISH acquisition of Columbus Stainless, has destroyed all hope of a R1,2bn German anchor investment in a cold-rolling mill at the Coega deepwater port and industrial zone in the Eastern Cape, industry sources said at the weekend.

Spanish stainless steel group Acerinox is to take a 64% stake in Columbus for àà 232m from January 1.

Highveld Steel, the Industrial Development Corporation and Samancor are equal partners in the venture and will each be paid in Acerinox shares.

German multinational Ferrostaal had been planning to build a R1,2bn cold-rolling mill either at Coega or next to the Columbus plant at Middelburg. Columbus was previously earmarked as Ferrostaal's local operating partner in the project.

Government, which is desperate to see industrial tenants at Coega, had been keen to see the Ferrostaal investment at Coega.

The cold-rolling mill is a scaleddown version of the original Ferrostaal plan, which had been for an integrated stainless steel plant at Coega a project which government's minerals technology and research body Mintek had been keen to revive.

"The Acerinox deal has killed any hope of Ferrostaal going ahead with the cold-rolling mill at Coega and it is almost certain Ferrostaal won't build the offset project (as part of the arms deal) at Middelburg either," said a senior steel industry official.

"If it is going to be built, and there is an economic justification for it, it will be built by Acerinox, run by Acerinox and sited next to the Middelburg plant.

"But they are due to take over Columbus on January 1 and that isn't going to happen from January 2 ."

Faced with the likelihood that the cold-rolling mill is not going to be part of the offset programme, Ferrostaal is looking at alternative back-up projects, including some in the steel sector.

"You don't just plan a narrow range of projects when you are carrying out this sort of deal," said a source close to the arms deal offset programme.

"You need to come up with more ideas than you will need, as some projects are bound to fall away.

"That explains why one of the Ferrostaal off-set projects is for a condom factory not something you would expect from a company which is mainly associated with steel, even though its activities go much wider than that."

A steel industry analyst said he was not at all surprised that the cold-rolling mill would not be built by Ferrostaal.

"However, I would never rule out government intervention, as it is dead keen to see that Coega is a success," he said.

Ferrostaal would have the option to cancel its offset projects and pull out of SA if it were prepared to pay a fine.

However, a Ferrostaal spokesman said the company would honour its obligations to put together valid projects and the work was continuing.

"As our envisaged local operating partner, Columbus's situation has changed with the involvement of Acerinox, we are awaiting the finalisation of these discussions for further exploration of the partnership with them. "Acerinox's involvement in Columbus is a significant development for the company and SA.

"Ferrostaal will not renege on its commitments we remain completely committed to the offset undertakings. We have identified and submitted potential projects within reasonable margins above the milestone."