Cisco’s new Turkish owners to invest R250m to bolster capacity and efficiency ahead of restart

The new Turkish owners of the Cape Town Iron and Steel Works (Cisco), in Kuilsrivier, in the Western Cape, will invest R250-million to expand and upgrade the facility and improve its energy efficiency ahead of its official restart, which is scheduled for either July or August.

The plant produces steel from scrap using electric arc furnaces, but was closed in 2010 and put on care and maintenance by its previous owner, Murray & Roberts, owing partly to surging electricity prices.

But in August last year, Cisco was sold to DHT Africa, a diversified investment group with steel, agriculture, marine, construction and trade interests in Turkey and Azerbaijan. All the group’s steelmaking outside of South Africa is also based on the processing of scrap and it currently produces around 500 00 t of steel yearly.

Cisco MD Kafkas Faziloglu, who has relocated to South Africa together with his family, tells Engineering News Online that the sale price remains confidential. However, together with the upgrade, it was probably the second-largest foreign direct investment by a Turkish firm into South Africa after Arçelik’s $327-million purchase of appliance manufacturer Defy Appliances in 2011.

The upgrade involves about six separate projects, which are being overseen by DHT Africa’s technology partner, which is CVS Technologies, also of Turkey.

The investment will raise the plant’s nameplate capacity from around 300 000 t/y to 400 000 t/y and will position it to produce reinforcing bar, or rebar, and, at a later stage, wire rod.

The product will be sold primarily into the South African market, but DHT Africa also plans to ship some product to other countries within the Southern Africa region.

To produce the new anticipated yearly rate, Cisco would need to source about 500 000 t/y of scrap metal, which is why Faziloglu is supportive of the Department of Trade and Industry’s (DTI’s) proposal to limit scrap exports and shore up supply for domestic consumers.

In a draft directive published in the Government Gazette in late January, the DTI outlines its proposed restrictions on the export of ferrous and nonferrous scrap metal through a mechanism stipulating that domestic consumers are given first right of refusal, as well as preferential prices.

Faziloglu argues that the local steel industry should be protected and nurtured, adding that restriction on scrap metal exports would be one way to support South African mini mills, as well as foundries and other processors.

But he is also satisfied with the support being shown by government more generally, with its upgrade benefiting from South Africa’s 12i tax incentive and both Transnet and Eskom showing a willingness to respond to Cisco’s power and logistics needs.

That said, rising power prices are a concern and about half of the planned capital expenditure will be directed towards the integration of energy efficient process solutions. Faziloglu is optimistic that the investment will help it shave about 12% off the plant’s previous electricity consumption.

Prior to start-up the company will begin a recruitment and training drive for about 360 people, having committed to re-employing a number of Cisco’s previous employees.

Faziloglu reports that more than 3 000 applications have been dropped through the factory gate since news broke that the plant would be restarted.

He acknowledges that the investment is being made during a difficult time in the steel cycle, but he remains optimistic that the brownfield investment will improve the efficiency of the facility and make it more resilient in the face of rising electricity costs and cyclical downturns.

Once the plant is restarted, the ramp-up to full capacity will take a few months, but by early 2014 the plant is expected to be producing at planned levels.