Growth in Namibia’s scrap metal industry: Scrap proves its mettle

In collaboration with Nedbank

Trade wars between the world’s largest economies continue with seemingly no end in sight. Often the small, open and developing economies – such as Namibia – end up being caught in the middle of these wars. One of the most targeted commodities is steel, as the US tries to rekindle its steel manufacturing industry. Steel is undeniably one of the most important and multifunctional materials to have been developed, with wide application in areas such as electricity transmission, construction, machinery, tools, and many more.

Namibia has no significant steel manufacturing industry and is dependent on importing most of its basic forms of manufactured steel, such as rebars (reinforced bars) for use in construction. Namibia does export some iron and steel, but the majority of this takes the form scrap and waste. In fact, between 2008 and 2017 Namibia exported just over 640 000 tonnes of scrap iron and steel. Although the annual volume has decreased since from 2008 to 2017, the value of these scrap exports has almost doubled from N$87.1 million to N$164.5 million.

Source: Namibia Statistics Agency

Scrap steel is 100% recyclable, meaning that what Namibia has been exporting scrap could be processed in the country and used to produce more complex and valuable finished products. This niche has been identified by the Otavi Steel Plant, which plans to develop a 300,000 tonne per annum mini steel mill. This mill plans to use scrap steel and iron available in Namibia, including what is generally exported, and importing additional scrap as production ramps up. This scrap will be used to manufacture concrete reinforcing bars and steel sections for the construction industry. Namibia will be the initial target market with possible expansion to neighbouring countries such as Angola, Zambia, Zimbabwe and Botswana. The development of this steel mill will see an initial investment of N$2.7 billion in the Otavi area.

The electric arc furnace is commonly used to melt steel scrap steel and iron to produce steel rebar and other products. Benefits of this method are that it is more energy efficient than primary steel production (i.e. producing steel from scratch) and can use any combination of scrap steel and pig iron. It is also a relatively flexible production method, meaning it is easy to start and stop production, and output can be easily varied to meet demand.

In Namibia, two key concerns arise when considering any sort of industrial development. The electric arc furnace is still an energy intensive process, generally only undertaken where there is plentiful, cheap energy and a well-developed electrical grid. As a result, these plants also often operate mostly during off-peak hours, when there is surplus generating capacity and prices are much lower. Namibia is heavily dependent on its neighbours to meet energy demand, with more than half of domestic demand being met by imports in recent years. Ongoing crises at Eskom call into question the reliability of these imports, and whether excess demand could be met.

Source: NamPower

Located in Otavi, the mill will hope to utilise Namibia’s existing rail infrastructure, both for transport of inputs (e.g. if scrap is imported) and moving its products. However, the Namibian rail network is outdated – most of the current rail capacity was installed by 1932 – and there are concerns around the reliability, capacity and cost of the only rail operator.

The Otavi Steel Plant plays an important role in Namibia’s move towards industrialisation. It is a significant capital investment that will create Namibian jobs while adding to the list of domestically produced value-added goods.

Source: Namibia National Archives