Government's 'Soviet-style' bid to reform steel tariffs won’t save ArcelorMittal SA

Government’s review of tariffs on imports to potentially increase tariffs on all steel products coming into South Africa will not be enough to save ArcelorMittal South Africa (AMSA), which recently received a R1.7 billion loan from the Industrial Development Corporation that postpones the shut down of its Longs Steel Business for six months.

Gerhard Papenfus, CE of the National Employers' Association of South Africa, said that the International Trade Administration Commission of South Africa’s (ITAC’s) review is a “systematic process of orchestrating the demise of the entire steel industry”.

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The ITAC review of steel industry tariffs, as directed by the government, was initiated by its contention that there is 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 announcing the review said.

 AMSA welcomed the review, noting that the local steel industry faces a severely weakened demand environment, significantly challenged by very low-cost imports predominantly from Asia, particularly China.

Tami Didiza, AMSA’s group manager of stakeholder management and communications, told IOL shortly after the gazette was published on March 19 that “South Africa has been slower to act and has also implemented protection at much lower levels than the global norm” in reaction to the global move to impose tariffs against cheap steel imports.

Papenfus argued though that the tariff review, which he is said is an attempt to rescue AMSA, is problematic for several reasons it could “even go as far as considering introducing of what amounts to an import ban, unless a potential importer can obtain a permit, which will be subject to the sole discretion of government, who will probably consult AMSA in deciding whether or not such permit will be issued”.

In a statement, Papenfus said that all protectionist duties implemented since 2015 have done nothing to save AMSA.

“AMSA is still struggling, even more now than 10 years prior, notwithstanding all the duties and billions in aid,” he said.

AMSA’s announcement that it would close its Long Steel Business unit in Newcastle, in January, caused consternation as it would directly affect about 3,000 jobs with the indirect impact of thousands more.

“All that has changed is the size of the steel industry; it is now substantially reduced, an industry in constant decline, suffocated by the duties. All that has increased is the quantum of both the duties and the financial aid to AMSA,” said Papenfus.

Papenfus also said that South Africa’s coffers are being depleted through aid to AMSA, which will be to no avail as “all users of steel, and that is all South Africans, must brace themselves and prepare for the day that there will no longer be an AMSA”.

During a webinar to unpack the ITAC review, 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 said that the consequences of additional tariffs would be “quite astonishing” as downstream fabricators could go out of business.

IOL