The official unveiling of the Isando Distribution Centre, in Germiston, on Friday, marked the next step in steel producer ArcelorMittal South Africa’s (AMSA’s) long-term initiative to migrate the bulk of domestic final product steel distribution from road to rail.

Dedicated rail links between AMSA’s production facilities in Newcastle and Saldanha and the Isando Distribution Centre steel rail hub in Gauteng, were established by State-owned rail group Transnet Freight Rail (TFR) late in 2016, with the first transport of steel by rail undertaken in early December.

The initiative is a multistakeholder partnership between AMSA, supply chain solutions business Barloworld Logistics, TFR, integrated logistics group Grindrod Freight Services and commercial and industrial property investment company Newlyn.

Barloworld is responsible for the rail flows between AMSA’s production centres and the distribution hub and it is working with TFR to extract efficiencies from the rail system and lower the cost of logistics. Grindrod Intermodal will operate the distribution centre, which is leased by Barloworld from Newlyn. From here local distribution by road takes place.

The Isando Distribution Centre is the three-year interim distribution solution in Gauteng while a permanent R140-million centre is being built at the Grindrod facility, in Denver, said AMSA CEO Wim de Klerk.

The second stage of the initiative will entail the migration of AMSA's steel dispatches into sub-Saharan Africa from road to rail, once distribution hubs in various locations in the region have been established.

The road-to-rail project is expected to reduce carbon emissions, logistical costs and road congestion, with rail replacing the movement of more than 42 000 trucks a year between Newcastle and Johannesburg.

Products will be stockpiled at the distribution centre and then distributed by road to customers in Gauteng.

The Isando centre is designed to receive some 700 000 t of steel products a year by rail, primarily from AMSA’s production facility in Newcastle.

This means that 700 000 t of steel will be taken off the long-distance routes and TFR will secure additional revenue in excess of R100-million, while improving AMSA’s service delivery and lead times to the downstream steel industry, he added.

The initiative will also increase Transnet’s market share of outbound steel on rail from 13%, or 400 000 t, in 2016, to 34%, or one-million tonnes, by 2018, when the hub has been fully ramped up.

“This represents about 80% of the AMSA Newcastle Works production and 20% of the production at Saldanha Works, the remainder being destined for the export market,” De Klerk noted.

Trade and Industry Minister Dr Rob Davies, opening the Isando Distribution Centre, said the project “ticked all the boxes” in terms of investment, job creation, public–private partnerships and many others and was in line with government’s national economic development objectives.

The initiative resulted in the creation of 52 new permanent jobs, with more openings expected as volume throughput increases.

“We anticipate that the establishment of this facility and resulting partnerships will catalyse the development of further rail solutions to migrate road volumes to rail, thereby extracting efficiencies from the rail system and lowering the cost of logistics for key sectors in South Africa,” said Davies.