Supply Chain Impact: Anarchy in South Africa Might Create Stock Outs for Shiny Appliances
In South Africa today, roaming power outages plague the country outside of Cape Town (where the lights are kept on for tourists). Mobs, violence and looting are fueling demand for 10 foot security walls to protect private and government property.
The US media avoided coverage of South Africa’s descent of the country into chaos as long as it could. The story still appears only in an occasional Reuters article. The root cause involves load-shedding by Eskom, the country’s operator of the power grid.
The fundamental issue in South Africa ties back to government corruption and gross negligence in maintaining the power grid. The issues stem from deferred maintenance of coal-fired power plants which today represents 80% of the country’s electricity source, unplanned outages, lack of investment in renewable energy sources, corruption at Eskom and corruption within the ANC (the ruling party).
A recent South African contact shared with us some thoughts about the current energy crisis and power outages. Essentially, it has become “normalized” within the country. Nobody thinks it’s odd to have the power just go off, “we don’t complain,” were her exact words. Oddly enough, Eskom has developed an app that allows people to track and be notified in advance of any impending outages. “If only they could put that investment toward actually fixing the grid,” was her comment.
While the impact on South African consumers brings local challenges by the day, the impact on industry (and the metals industry in particular) is more far reaching.
MetalMiner, an industrial publication, recently noted that “South Africa serves as the world’s largest producer of chrome and the second or largest producer of ferrochrome (depending on the source). Ferrochrome, in turn, serves as a key raw material for making stainless steel. In short, the global supply of ferrochrome depends upon reliable electricity generation in South Africa. Ferrochrome from South Africa goes to several countries but the biggest importers include China, Japan and the United States.”
Based on a MetalMiner analysis of ferrochrome imports to the U.S from Q1 2021 to Q4 2022 the following analysis suggests the severity of the reliance of the U.S. on South African ferrochrome imports: (Source US ITA):
Perhaps it’s time to purchase that shiny new refrigerator or dishwasher before you have to opt for the mat finish.
Jason Busch and Lisa Reisman are Editors at Large
