The production of specialised products, such as stainless steel heat-exchanger tubing, for the industrial power generation industry could hold significant benefits for local stainless steel manufacturer Fischer South Africa (SA).

Fischer SA MD Erich Kotzenmacher says the company is actively pursuing investment in the local manufacture of stainless steel tubes for heat exchangers to sell to State-owned power utility Eskom and chemicals company Sasol, among others, for use in new and existing power stations and heat processes.

“Generally, the local power generation industry imports all its heat-exchanger tubing . . . However, there is no reason why these products cannot be sourced and manufactured locally,” he says.

Fischer SA has the potential to manufacture to Eskom’s standards, but requires a substantial commitment before it can invest in the equipment required to produce a stainless-steel- material type which is currently only available in the US, he says, adding that the manufacturing process and knowledge exist at Fischer SA.

The local heat-exchanger tubing sector is currently vacant, he states, adding that Eskom holds the greatest potential to localise this market.

Heat-exchanger tubing is manufactured through the on-line annealing process, whereby stainless steel tubes are manufactured and heat-treated in a single process, with the end product being manufactured as a single process. Alternatively, off-line annealing requires stainless steel tubing to be heat-treated as a separate process after it has been manufactured.

Stainless steel heat-exchanger tubing “is a product line which Fischer SA is keen to develop”, says Kotzenmacher.

Company Expansion
Fischer SA has ordered an additional tube mill, to the value of R20-million, to complement the current five mills at its Centurion-based factory, which has a floor space of 19 500 m2.

The new mill is expected to arrive in 2016, and Kotzenmacher says it will increase Fischer SA’s production capacity by 20%.

Further, Fischer SA is constantly investigating ways to increase the quality of its products by developing and using new techniques and technologies, as well as using new and up-to-date equipment.

“Our greatest challenge is competing with stainless steel products coming from China, which is a mass producer with a 15% government rebate on local production,” he says, adding that this enables manufacturers to sell at cost.

Additionally, the import duty on stainless steel tubing into South Africa is comparatively low, compared with the duty of the other four emerging economies of Brazil, Russia, India and China, also known as Brics.

Kotzenmacher adds that, in some cases, distributors in South Africa can import Chinese manufactured products at a cheaper price than locally sourced raw materials.

Meanwhile, he also notes that the South African stainless steel industry, as with many other industries, is currently stagnant, owing to poor investment from overseas investors, a lack of new major projects by State-owned companies and the deepening electricity crisis resulting from Eskom’s undercapacity. “Government could improve this aspect by assisting with local-content incentives,” says Kotzenmacher.

To remain sustainable and competitive in an environment fraught with power uncertainty, Fischer SA installed backup generators at the end of 2014 to maintain 80% of its production levels during a power outage.

“The stainless steel industry has been stagnant for the past two years and, while I do not think it will get any worse, I also do not see it improving any time soon,” says Kotzenmacher.

Importance of Automotive Industry
About half of Fischer SA’s business is to supply stainless steel products to local automotive original-equipment manufacturers (OEMs), with the rest being supplied to the local commercial market, such as architectural projects, through distributors.

The bulk of products supplied to the automotive industry comprises exhaust-system components and catalytic converter housings, supplied to several local vehicle manufacturers.

Fischer SA is attempting to increase its market share in the South African automotive industry.

Fischer SA sales manager Johann Schmitt says the company is alert to the development and supply of niche products to increase orders in the automotive sector. “We are constantly finding new manufacturing techniques that we use to offer clients unique products.”

Schmitt notes that, in the past, certain exhaust systems used 304-grade stainless steel, but, owing to the nickel content in this grade, the price was prone to erratic fluctuations because of the rand:dollar exchange rate.

“The message from the automotive industry at the time was that it needed a stainless steel with a stable price,” he says.

As a result, Fischer SA started the development of 4509-grade stainless steel specifi- cally to counteract the pricing implications of stainless steel containing nickel.

However, the 4509-grade stainless steel requires special welding techniques because of its unique composition and because it is slightly more difficult to source.

Currently, the vehicle OEMs are predominantly using 4509-grade stainless steel in their components, says Schmitt.

“This new grade has the same corrosion resistance and it is cheaper than the grade it replaces,” he adds.