Sa metal mini mag

COMPANY PROFILE

2013

SA METAL GROUP

From humble beginnings…

COMPANY REPORT

From humble

beginnings…

Editorial – Roland Douglas Production – Hal Hutchison

SA Metal Group is one of the largest scrap metal companies in South Africa. With a national footprint and state-of-the-art technology in all of its yards, the company is always looking for opportunities to expand its operations. MD and third generation family owner, Graham Barnett, tells IndustrySA about how the company has managed its success.

Is your company making money from its scrap metal? No? Well it should be. Everyone can utilise the value in their scrap, whether it is an individual picking metal cans from the side of the road, a family selling their old car or a company demolishing their warehouse, there is a lot of money in the scrap metal trade.

At times it is almost unbelievable that companies and individuals do not take more care to unlock the value in their scrap metal because there are now many ways to dispose of scrap metal safely and profitably.

One company who knows more about the scrap metal industry than anyone is SA Metal Group. Interestingly, SA Metal Group is the largest and oldest scrap metal business in South Africa, with some of the biggest and most advanced machinery on the continent but the company, at its heart, is a family business with a profound story.

Managing Director, Graham Barnett, recently told IndustrySA more about the company’s growth from humble beginnings and how the business is poised to enter its fourth generation of Barnett family ownership.

“SA Metal Group (previously SA Metal and PAGE 2 SEP 13

Machinery Company)” says Barnett “was started in Cape Town in 1919 by my grandfather, Wolfe Barnett, an emigrant from the UK. His father had pushed a wheelbarrow around London in the 1890s collecting scrap. The family immigrated to South Africa in about 1900.

“At first the main business was buying up used machinery and breaking it up for spares” he says. “Scrap was a by-product and was exported to the UK packed in 44-gal drums on the decks of steamships. As spare parts became more readily available in ‘the colonies’ the machine business dried up and scrap metal became the main focus. In 1946, my father joined the company and eventually took over the helm. My brother and I joined in the early 1980s. My son entered the business last year being the fourth generation of the family.

“My brother looks after all the operational aspects of the business and I look after all of the administration and trading but we very much run the business together.

My son is in charge of the Gauteng operations but very much being guided by his father and uncle. We obviously don’t do it all ourselves, we have a large team that reports to us.”

SA Metal Group

“It all goes to the East; India, China, Taiwan, Malaysia, Indonesia, they all require incessant quantities of scrap metal, the prices go up and down but there is always a market”

94 YEARS OF OPERATION SA Metal has been in operation for the best part of a century and next year the company will celebrate 95 years of successful operations but Barnett says that the real party will come in six years’ time when SA Metal turns 100 years old.

“We will definitely be marking the occasion of 95 years with a suitable celebration. This will be a rehearsal for the really big bash in 2019 when we celebrate our centenary.

There are very few companies which make it to 100 years and we are possibly the only family-owned business in South Africa to remain in the founding family for 100 years.”

Since the company’s establishment in 1919, activities and services have diversified and developed but scrap metal has remained the core focus. Barnett explains the process through which all scrap metal must go through before the company can sell it on to customers around the world.

“Our main business is scrap metal trading and processing and what that means is that we are buying scrap metal from wherever it arises; from a small dealer, to a large dealer, to a factory, to a parastatal, to a demolition firm, from all these sources we gather in scrap.

“All of it has to be processed to a form where it can go

into a furnace. A scrap car for example, cannot go straight into a furnace as it has rubber tyres and glass etc. What a steelworks wants is not a car but pieces of steel with no attachments. We would process a car by putting it through our shredder which separates the car into small pieces and separates steel from all the other materials. All the steel then goes to a steelworks and the rest goes to our sophisticated sifting plant which picks out non-ferrous fragments from dirt. The non-ferrous then goes to consumers of these metals while the dirt goes to a landfill site.

“The general idea is that everything is processed into a form where it can go into a furnace in bulk quantities without different materials being mixed together.

“It’s the same for copper. A foundry wants to receive one type of copper, without any attachments, with no dirt, in the right size pieces, in bulk quantities and usually on credit terms.”

SA Metal does not deal exclusively in steel or any other type of metal. The company is expert in the processing of all forms of ferrous and non-ferrous metals including steel, iron, aluminium, copper, zinc, lead, nickel, brass, tin, bronze, etc.

So where does all the scrap metal come from? And where

SEP 13 PAGE 3

COMPANY REPORT does it go? SA Metal has fully equipped yards all over the country where individuals and businesses can drop off their scrap and for bigger, industrial sized pieces of scrap, the company has a fleet of vehicles which can collect materials and transport them to the appropriate facility. Processed metal is then sold on to local consumers such as steel mills and foundries. The surplus not required by domestic consumers is exported to foreign markets.

“We collect scrap metal in a lot of places and a lot of people will deliver scrap metal to one of our many yards,” says Barnett. “In factories for example, we will place skips, bins and containers and collect them when they are full.

Often we get calls from industries of various kinds who have old machines that they want to get rid of but they don’t have on-going generation of scrap. In this case we will send trucks with cranes to collect the scrap. We also buy from smaller scrap dealers and collect from them or have them deliver to us.

“We supply integrated steelworks, who have a relatively small demand for scrap (iron ore being their main source of iron units), as well as mini-mills who use scrap almost exclusively. A small amount also goes to domestic foundries.

The balance, after domestic demand has been satisfied, is exported.

“It all goes to the East; India, China, Taiwan, Malaysia, Indonesia, they all require incessant quantities of scrap

PAGE 4 SEP 13

metal, the prices go up and down but there is always a market.”

From afar, the idea behind the business seems pretty simple; buy low, process, and sell high. Of course, in reality, the processes involved are much more complicated and the amount of people and technology involved signify the complexity of SA Metal’s operations. Furthermore, there is a very competitive scrap metal sector all fighting to secure the limited amount of scrap metal arising in the economy.

Therefore SA Metal’s buying prices always have to be razor sharp.

The company’s steel shredding plant in Cape Town produces shredded steel scrap at a rate of up to 120 tons per hour, reducing auto bodies, home appliances and other steel structures into fist-sized clean fragments of steel.

At the facilities in Epping and Germiston, two 1000 ton Lindemann shears, the largest in Africa, cut seamlessly through heavy steel items such as beams and girders with a third 1000 ton shear soon to be operational in Pretoria. The maintenance of these super machines is just another issue for the SA Metal team to navigate. Barnett lists ‘purchasing the best quality equipment and maintaining it to excellent standards’ as one of the keys to the company’s success and he also states that staying up to date with state-of-the-art technology has been important to the company’s growth.

“Our roll-out of new collection yards in the Western

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COMPANY REPORT

Cape has been very successful,” he says. “All our yards are state-of-the art with concrete surfaces and excellent computer systems and communications.

“The commissioning of our steel rolling mill in 2011 was one of the company’s most significant achievements.

The mill is performing well and production is increasing at a steady rate. Quality has been well received by the market and we intend on increasing our range of products in the coming years.”

SA STEELWORKS SA Steelworks is the manufacturing division of the SA Metal Group and produces steel billet, reinforcing bar and round bar in straight lengths and coils. All of the production comes from completely recycled scrap metal and is certified by the South African Bureau of Standards (SABS). The goal of SA Metal is to expand the operations at SA Steelworks over the next few years, maximising revenue from both the export and local markets.

“We intend to double the melting capacity of our steelworks in order to convert all steel scrap arising in the Cape Town area into billets for the export market or steel bars for the domestic market,” says Barnett. “We also intend upping our copper melting capacity. We have new yards coming on stream and we are planning further

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yards over the coming years.

“We see good potential in the mine rehabilitation business and will be adding more heavy equipment of this type. Our waste removal business is also doing well and will be expanded as demand for our services increases.”

Clearly, expansion is one of the hot topics for Barnett and his colleagues but while there are many opportunities to expand in different ways, for now the company will stick to the South African market and focus on developing its footprint in existing regions.

“Our next focus is going to be continuing our growth in South Africa. At the moment there is nothing planned for outside Gauteng or the Western Cape,” he says.

Currently, with around 1200 employees across the country, the business is most active in the Cape Town region but with successful facilities in Johannesburg and Pretoria.

As well as having the best quality equipment in use at all of its locations, SA Metal has a resilient commitment to its employees. When asked what makes the company successful, Barnett replies: “A family atmosphere and loyalty of our staff, employing high quality personnel and close attention to health and safety of our staff and of anyone who enters our premises.”

Clearly, there is an emphasis placed on employee

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COMPANY REPORT wellbeing and Barnett reiterates a point that we have heard on many occasions – happy staff equals happy company.

“We certainly do have a commitment to our employees” he says. “We have a comprehensive medical facility on site with a full time doctor and trained nursing staff. We have a lot of training programs in place and lots of other forms of commitment like active safety committees, rigorous procedures for dealing with accidents etc. The general idea is that if we look after our staff, they’ll look after the business.”

ECONOMIC CHALLENGES As with all businesses, in all industries, the current economic climate has not been conducive to good business for some time and in the case of scrap metal, economic activity is a dictator for the industry’s performance.

Barnett suggests that the sluggish economy has had an impact on the business and he is hoping that the promised infrastructure spend from the government will provide a needed boost.

“The scrap industry is very dependent on economic activity” he says, “and this has been declining in South Africa since the onset of the great recession.

2013 has been a challenging year with slow economic activity. The government has been promising massive infrastructure spending and we are hoping that this will soon be translated into activity.

“There are always opportunities to be found but they are fewer and further between in a slow economy.

“It’s difficult to know where new infrastructure spending starts and where it ends. I think most people would agree that we are still waiting for spending to kick off. We deal with all the rebar cutters and benders.

They are the ones who are affected by government infrastructure programs and they’re all complaining that they’re still waiting for the happy day when all this spending starts.

“As far as the scrap business is concerned, the World Cup was not too much of a big deal. There was some demand for rebar for building the stadiums but it wasn’t such a big deal. The current talks relate to much more expensive infrastructure which will hopefully translate into much more widespread economic activity.”

Results of a Platts Survey released in April showed that the demand for steel is still relatively slow, not just in South Africa but around the world. The report suggested that the South African steel sector relies on a vibrant domestic construction industry, something

PAGE 8 SEP 13

which has been lacking since 2010. The survey also suggested that opportunities on the African continent are where many South African construction firms have targeted to make up for reduced local demand.

Most importantly, the survey found that confidence was lacking, across all sectors, but the governments promised R4 trillion in strategic infrastructure spending over the next 15 years would stimulate confidence, as soon as the major construction firms begin to see spending come through.

Barnett says that SA Metal is always monitoring market trends and when the time is right, the company will continue on its path of expansion.

“We are always receiving signals as to how buoyant things are; the volume of scrap coming in is a good signal. At the moment, the volume is lower than it was last year and that was lower than the year before but we will react to the amount of scrap that we can procure. If we see we need more equipment or there is an opportunity to open another yard, then that is what we do.”

The behaviour of the economy is cyclical and thus, with time, confidence and activity will return to the market and when the government’s spending plans filter through, there should be plenty more opportunities arising for the SA Metal Group.

Until then, the diverse portfolio of services and the widespread strategic footprint of the company will all help to contribute towards its growth.

“Our success comes from honesty and integrity in all our dealings and hard work and a passion for our business,” says Barnett.

Who would have thought that all of the success would stem from one man and his wheelbarrow, wandering around London collecting scrap more than a century ago? A remarkable story that looks set to continue for many years to come.

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