The capacity of some aspects of the smelting industry in North America, such as the steel sector, has significantly deteriorated in the past 25 years, as a result of Chinese companies dominating the market and supplying cheaper products, says South Africa-based foundry and engineering company Thos Begbie.
The company aims to concentrate on superior consumable items thereby increasing the uptake of its services in the North American market, which it regards as an area of incremental business.
Thos Begbie CEO Edwin Dreyer relays that the US is a relatively new market for the company with major competitors based there. “We are battling to beat them and to get business; however, we keep trying.”
The company is working on supplying water-cooled copper sidewalls for furnaces belonging to Canada’s largest diversified mining company Teck Metals and US palladium and platinum mining company Sibanye-Stillwater in North America; two of the continent’s four major smelting sites.
Thos Begbie expects its market in North America to increase by a small margin only because there is little opportunity for new smelters to be opened currently, hence, the company’s focus on supplying consumable items on the continent. Dreyer emphasises, however, that the company is prepared to work hard for this marginal growth in market share.
“These smelters are among the lowest-cost producers in the world, owing to their having access to a vast amount of cheap electricity. Canada, in particular, has significant water supplies and water generates electricity through hydropower plants. The west coast and eastern Canada are sites where mining has been reduced over the years, but the smelters import minerals from the rest of the world and process it into final metals,” he adds.
Dreyer says the company has established developmental partnerships with smelters, which involve working to improve the performance of their furnaces by designing furnace upgrades before projects go out to tender.
“We don’t automatically get every order that we quote on but, in most cases, we . . . get up to 80% of the business. The partnerships we form with smelters are on a technological basis, offering design capacity. Very few smelters have their own in-house design consulting engineering capacity, so some smelters outsource this aspect to engineering and consultancy firms, such as Hatch, which is the biggest in this field in North America.”
Thos Begbie is collaborating with one of these consulting groups to develop an improved design of stave coolers for blast furnace converters used in the steel market to ensure greater efficiency and a longer operating life.
Dreyer says Thos Begbie is regarded as one of the top six approved suppliers in the world and attributes its competitiveness to its high-quality, on-time delivery and technical content.
“The reason there are only six manufacturers of cast copper water-cooled furnace components in the world is because it takes many years to develop a business that is capable of producing components to the quality that clients want. It’s a very difficult industry if you consider that some of the components that we manufacture weigh up to 16 t and we are the largest supplier in the world that can produce single castings of this size from copper.”
He says it took the company many years of development and capital expenditure to get to the stage where it can meet its clients’ sometimes incredible requirements regarding size, quality and complexity.
Thos Begbie competes with other companies on the basis of producing high-quality products and delivering these on time. When a smelting company is rebuilding a furnace, there can be about 3 000 people on site all working in a sequence and, when workers get to a point where Thos Begbie’s product is needed, they cannot be made to wait, explains Dreyer.
“If construction contractors wait, the delay will cost the smelter millions of dollars. Our clients trust that we will deliver on time. We also compete with regard to the cost of our products, although we are not necessarily the cheapest manufacturer. However, we have perfected the quality required in foundry manufacturing and that is the driving demand for our products.”
Dreyer explains that regulations present enormous challenges for the company in terms of packaging, logistics management and foreign exchange payment.
Products are either shipped to clients or transported using air freight. For example, when having to deliver 120 t of components from South Africa to, for example, Canada, the logistics of managing the transportation of this tonnage over this distance is “enormous and costly,” he adds.
Dreyer says it can cost the company more than $2-million to deliver products from South Africa to a mine in North America using air freight. “The packaging method has to be acceptable to the country involved and it has to be treated, fumigated and certified.”
He says the regulatory procedures can cause a delay in the delivery of products to their destination, especially when part of a shipment is impounded for up to two weeks for inspection. Regulations can also come into play during payment by internationally based clients, as foreign exchange needs to be approved by the South African Reserve Bank and can sometimes take up to six months for a payment to clear, affecting the cash flow of the company.
Dreyer believes that if South African and international mining companies could use their power to lobby and influence South Africa’s government and theirs to change regulations and policies currently restricting growth and increasing the cost of doing business, resulting in higher costs of production, Thos Begbie would be able to further grow its footprint in North America.Creamer Media Senior Deputy Editor Contract Publishing and Sales