In 2014, DSP faced different challenges, mainly financial and commercial. Operationally, the results were acceptable in terms of volume and transformation costs, but disappointing in terms of quality, with a rate lower than expected.
The local market that was so attractive the previous year, proved disappointing not only as a result of a consistent dip in demand in local consumption, but also because of the slump in the South African GDP, a phenomenon that affected the economies of all emerging countries. In July, most end-users were obliged to stop activities due to a long strike declared by NUMSA supporting a National wage negotiation. In addition, DSP’s biggest competitor started a “price war “to recover its market share by offering a rebate on all flat products. Further, the USD/Rand exchange rate proved very volatile, increasing by an average of 15% and dramatically reducing the selling price in USD.
As a result of the price war, DSP was obliged to offer its products to the local market at a higher price than its competitors. However, in recognition of DSP’s reliability, quality and service, there was no decrease in the flow of orders.
In general, DSP’s export sales, mainly to the USA and Canada, increased significantly, an outcome of consistent improvement in the growth of the USA economy, as well as reduced transformation costs, the result of saving activities and weakness of the local currency.
DSP’s total throughput increased by 25% on galvanised and cold finished products, despite the fact that the strategy adopted for the cold finished value-added product could not be implemented as planned. The strategy was based on the specific raw material, Full Hard, imported from TANGSHAN STEEL. After a few successful tests, the required quantities were unavailable; hence the plan has been postponed for a year, when the Full Hard will be available again.
In 2014, the 15-year supply agreement for HRC with the local supplier expired. DUFERCO SA assisted and supported the import from alternative suppliers, mainly from China.
Special projects, aiming at cost reduction, have been implemented: the coal boiler is fully operational, allowing 2Mio USD/year saving, while the installation of a new slitting line will lead to a consistent reduction in variable costs, following its commissioning and start-up in February 2015.
The saving mentioned above, as well as the weakness of the local currency, placed DSP in position to compete with India and China in the export of uncoated and coated products to the USA.
DSP will continue to focus on activities that encourage savings, promote projects that will enable it to face competition in both local and export markets. DSP will also further develop its strategy on value-added products and will continue to use every effort to maintain its reputation of reliability, quality and service to maintain the same market share, despite a premium requested by the customers.