Embattled ArcelorMittal South Africa welcomes steel tariff review process

ArcelorMittal South Africa (AMSA), which is in dire financial straits, has welcomed the International Trade Administration Commission of South Africa’s (ITAC) review of the steel industry tariff review.

The ITAC review could be a lifeline for the company if additional import tariffs are imposed. AMSA, which has been in existence since 1928 having started out as government-owned Iscor, is in favour of localisation and domestic supply.

The biggest steel producer in sub-Saharan Africa announced late last year that it was looking into closing its long-steel business in Newcastle and Vereeniging. This placed about 3 000 people at risk of losing their jobs and spurred government to help bail the company out.

So far, government has extended some R1.8 billion to partially bail the company out on condition that AMSA participates in the Productivity SA turnaround and recovery programme.

The Government Gazette announcement of the ITAC review published on March 19, the same day that the Trade, Industry and Competition Department announced its partial bail out, said that its investigation was prompted by current economic and trade challenges.

Among those, it said, was the global steel production overcapacity, increased trade protectionist measures by some countries, slow economic growth, and energy and freight logistics challenges. The review will investigate aspects such as import tariffs.

“Additional trade policy instruments may be necessary to ensure the facilitation of our industrialisation objectives and socio-economic goals, which are supportive of our domestic steel production capabilities and jobs,” the Gazette said.

During a Wednesday webinar to provide further information on the review as well as the state of the current steel industry, Donald MacKay, founder and CE of XA Global Trade Advisors, said adding import duties to all incoming steel would add another R1.76 billion in import tariffs, which would raise the cost of everything in the value chain and reduce exports.

MacKay added there were already mechanisms in place to reduce tariffs on imports, yet there was a reluctance by ITAC to issue permits for this if there is a local supplier.

The effects of additional tariffs, MacKay said, would be “quite astonishing” as downstream fabricators could go out of business. He noted the review sought to lock out imports.

During the webinar, MacKay said that there was a need to address oversupply and economic growth challenges, with a focus on balancing supply-side measures with the need to protect downstream industries.

MacKay’s presentation, which he shared with IOL, contained a quote from ITAC Chief Commissioner, Ayabonga Cawe: “Now, to what extent does having our tariffs bounded in the way that we have limit our ability to extend effective protection to the sector? That’s something the review is looking at directly.”

Cawe added that “one part of what we are gazetting is to say here are a few products – anything from steel tanks, tubing and so on, to these galvanised steel products – that we are considering recommending to the minister [Minister of Trade, Industry and Competition in South Africa is Parks Tau] be included under import control”.

Tami Didiza, AMSA’s group manager of stakeholder management and communications, in welcoming the review, told IOL that the South African steel industry faces a severely weakened demand environment, significantly challenged by very low-cost imports predominantly from Asia, particularly China.

“While many countries have been swift to impose appropriately levelled tariffs against the cheap steel imports, South Africa has been slower to act and has also implemented protection at much lower levels than the global norm,” Didiza said.

Didiza added that the company sincerely hoped and expected that the “outcome of this review will result in measures that will be boldly and implemented timely within next few weeks and months”.

MacKay noted that, on average, tariff investigations take just more than two years. “However, there is massive political pressure”. Tau, he said, wanted feedback by July, but MacKay did not see “any prospect of this being wrapped up by July and a proper job done”.

Didiza was not in a position to comment on the longs business, although he said, “we will provide updates and information as soon as it becomes available”.

IOL