By introducing a world-class manufacturing programme and optimising energy management at the facility it has gone from being one of Luxembourg-based steel maker ArcelorMittal's highest-cost factories to one of its lowest-cost producers.
A case study headed by the United Nations Industrial Development Organisation shows that even if no further investments in energy efficiency are made at Saldanha, and assuming all conditions are kept constant, the savings will be R362m by 2016.
This comes as national electricity utility Eskom asks industry in SA to reduce power consumption by 10% during peak periods, which ArcelorMittal SA has agreed to do. But its Saldanha facility has already reduced electricity consumption from 1,311 kilowatt-hours (kWh) per ton of hot-rolled coil in 2008, to 1,190kWh/ton last year. It has also halved usage of liquid natural gas, significantly lowering its carbon footprint.
The energy savings come as the quality of iron ore used at the facility undergoes "natural deterioration", which is affecting the burn rates of coal and coking coal used in making steel. This is happening because supplier Kumba's Sishen iron-ore mine in the Northern Cape province is being depleted of easy pickings.
"Sustainable change is the most challenging aspect although we need to make continuous improvements," says Reinet van Zyl, energy manager at the Saldanha works. The plant wants to reduce its reliance on Eskom, as energy makes up 44% of its costs. But by reviewing operational assumptions, and incrementally changing the operating principles and philosophy, she says, the "purity" of inputs have been optimised, improving product quality and output.
At the same time, ArcelorMittal SA says it is pursuing a potential power purchase agreement with an independent power producer. It says approvals for an 800MW power plant using compressed natural gas from Angola will be required from numerous government agencies.
Such projects are part of initiatives to boost energy supply security and mitigate rising electricity costs.
In this regard, the company says the relining of its Corex furnace, scheduled for 2016, presents an opportunity to conclude initial work that allows the possible tie-in of gas to the iron-making part of the steel process. However, it has not disclosed the estimated costs for such an undertaking.
Much of the hot-rolled coil made at Saldanha is used for roofing in Africa. The plant makes 1.2m tons of steel a year, mostly for export.
Saldanha plant general manager Richard Holcroft says the facility has been faced with challenges that threaten its existence. But the government has just designated Saldanha Bay an Industrial Development Zone, ahead of legislation that will introduce Special Economic Zones.
This is part of SA's R4trn infrastructure plan, covering hundreds of projects over the next 15 years, across 18 Strategic Infrastructure Plans.
Saldanha Bay is one of these, linking iron ore and potentially manganese producers in the Northern Cape to a deep-water port about 100km from Cape Town. While business expects a raft of incentives to flow from such plans, it appears preferential labour and energy prices will not be part of the mix.
The energy savings at ArcelorMittal SA's Saldanha plant also come as the state seeks to introduce a carbon tax from 2015. This will affect the country's biggest energy users.
Energy Intensive User Group of Southern Africa's chairman Mike Rossouw says such a tax will be too much for business, along with escalating electricity and transport costs.
** Allix was a guest of ArcelorMittal SA in Saldanha recently.
Source: Business Day via I-Net Bridge
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