One of the biggest challenges a mining operation faces is the fluctuation in the price of its natural resource. In recent times the steel industry has certainly felt the effects of deviations in the price of steel and the prevailing low value has impacted greatly on the viability of many mines.
Such challenges can make or break a mining company and many businesses have had to look carefully at how they can offset lower demand. At Evraz Highveld Steel and Vanadium Corporation the situation lead to a strategic re-think a couple of years ago and just two years after Evraz had purchased a South African business dating back to the late Fifties.
Mike Garcia, chief executive officer, takes up the story; “The operations were started by Anglo American (then called Anglo American Corporation of South Africa Limited) and today we run a steelworks in Emalahleni in Mpumalanga from where we produce steel and vanadium (which is used as a strengthening alloy for steel) and a mine in Mapochs (near Roossenekal). We produce between 700,000 and 800,000 tonnes of steel per year for the construction, infrastructure, transport and durable products markets both locally and internationally. Export accounts for 20 to 25 per cent of our produce.”
The company had started out in 1957 under the moniker of Minerals Engineering of Colorado, a company that produced 1.4 million kilograms of vanadium pentoxide each year from its eMalahleni plant. Anglo American’s involvement quickly followed and by 1966 the business, now called Highveld Steel and Vanadium Corporation Limited, had become the global leader in vanadium production.
A series of acquisitions took place over the ensuing decades as the business grew and evolved and then six years ago Evraz began the process that ultimately led to its 2008 acquisition of Highveld. Evraz plc is one of the world’s largest vertically-integrated steel, mining and vanadium businesses, with operations in Russia, Ukraine, Europe, North America and South Africa. It employs 110,000 people globally and is one of the world’s largest steel producers.
In 2010 the company name was changed to Evraz Highveld Steel and Vanadium Limited and it remains a major player both within South Africa and internationally, manufacturing long products, structural shapes, plate and coil products.
Garcia says that in South Africa the takeover had little effect operationally, but that financial performance and the need to adopt a global way of thinking have been key drivers since he became CEO fourteen months ago; “The transformation has been more towards the culture of a global company,” he says. “We have looked at ways to improve labour efficiency, lean manufacturing and improving our maintenance.
“We have introduced internal lean manufacturing training for all employees and while it is still too early to say this has made a huge different yet, we should see significant results in the next two to three years. Our maintenance procedures already used SAP software but we are adopting a new approach to predictive and preventative maintenance right now and this should in time produce a 20 per cent total reduction in maintenance costs.”
Garcia says that the need to restructure was very much a case of reacting to tougher market conditions: “The steel industry is under strain at the moment and it is unquestionably a difficult market here in South Africa; we lost money in 2010 and although we broke even in 2011 the first half of 2012 has been challenging once again.
“Global steel prices fluctuate according to demand which right now is soft and prices are consequently low. We always have to be mindful of prices and ensure that our prices and costs deliver a margin which is why we embarked on our restructure.”
Steel prices are not the only concern for Evraz Highveld and the call for greener mining and production has grown louder in recent years. Garcia says that the company has listened and has implemented a number of improvements to help improve the environment; “We have addressed air emissions by putting controls in place at the iron plant and have also significantly improved our use of water, water management systems and waste management,” he affirms.
Water is drawn from Witbank (Emalahleni) municipal dam and, in the interest of water conservation, Evraz Highveld Steel and Vanadium water treatment plants and process water circuits have been designed to eliminate water wastage and effluent.
According to Garcia, 2012 will be a year more focussed on consolidation than spending, although last year Evraz Highveld spent roughly 170 million Rand upgrading a furnace for the iron plant – this he says has helped to lower the cost of the furnace and has slightly increased capacity.
Training has played its part in the company moving from a BEEE rating of 8 to 5 in the last two years, as the company invested in the training of previously disadvantaged black workers. “Our focus is to continue to improve our rating and we do this not only through training but also our supplier selection and the economic development of small black-owned businesses and our own management profile,” Garcia explains.
“While we may not be investing in equipment this year our training programmes will continue, the company has always invested robustly in this area and we aim to focus training on operational and maintenance skills. We are also concentrating on our restructuring exercise and this should be complete this winter,” he continues.
And while demand for steel may be low at the present time, Garcia is hopeful that South Africa’s ambitions will make for a busy future: “The (South African) Government’s major infrastructure development is still on the drawing boards at the moment. The Government has identified 17 strategic infrastructure projects and these are all still in the planning and development stage and will move towards execution in the years to come.
“Once the projects start happening it will benefit Evraz; we are further down the value chain so this is still some way off right now. Once the country gets back on the growth path it will make for a very interesting future and the same will apply across the whole sub-Sahara region, as these countries are ready to develop their infrastructure Evraz Highveld will be there to assist.”