A HIKE in import duties instituted by South Africa on imported steel products in December will hurt the industry, the National Employers’ Association of South Africa (Neasa) said, although it has emerged that some players in the industry recommended the tariff hikes to the International Trade Administration Commission (Itac).

ArcelorMittal South Africa (Amsa) last year said it was halting production at its long steel business operations, citing slow economic growth and negative demand.

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) also blamed the Department of Trade, Industry and Competition for failing to “create an enabling environment conducive to growth, stability and job security” in the aftermath of the long steels wind-down announcement by Amsa.

Gerhard Papenfus, the CEO of Neasa, said on Monday that further to the problems afflicting steel manufacturers in South Africa, the industry had been slapped with new duties on imported products last month.

The new import duties would contribute to the death of the local steel manufacturing industry as these were meant to protect Amsa, he said.

“A whole new set of duties to protect Amsa was introduced in December 2023. These duties include certain specifications of galvanised coil which ArcelorMittal SA does not even manufacture (and) markets for these particular products will simply disappear because there are no substitutes,” said Papenfus.

Some players in the steel sector depend on imported products to sustain their operations and supply to the market.

According to the South African Iron and Steel Institute (SAISI), the country imported 1.2 million tons of primary carbon and alloy steel products for the period January to October 2023, a 12% increase on the prior year.

Bigger players such as Amsa are against these imports and had written to the Itac seeking imposition of import duties on steel products.

Amsa was unable to comment on this on Monday citing ongoing engagements with the government. Tami Didiza, the spokesperson for the company, said that it was “currently undertaking intensive and delicate engagements” with “government and other key” stakeholders.

However, in a general notice in December, the Itac said it had received an application for “an increase in the general rate of customs duty on certain coated or plated flat rolled steel” from Amsa and Safal Steel.

The commission had consequently considered the application against the backdrop of “the strategic nature of the steel industry” to South Africa, the global excess capacity of steel making and “an anomaly in the tariff structure as the locally manufactured steel attracts 10% duty while imported products are free” of duty.

According to Neasa, the import duties, including several other steel products that are not produced locally by Amsa, were introduced in December.

He said the duties “trigger an evil cycle that, in the long run, proves to be unproductive” for all involved.

For Amsa, the duties were likely to cause a “decline of its customer base,” with the company’s continued reliance on elevated “duty protection” having a negative impact on local manufacturing.

“The destructive impact of the slow poison caused by the duties does not deter Amsa from selfishly squeezing all they can get out of the steel industry, and in doing so, short-sightedly, disregard the long-term impact on themselves, their customers, the steel downstream, and a century-old industry,” said Papenfus.

With imports growing, South Africa’s exports of steel products have been falling.

Data from the Department of Trade, and Industry shows that that the value of South African steel exports decreased in 2023.

Industry groupings such as Seifsa, nonetheless, remain convinced that many of the country’s challenges in the steel sector can be best addressed through private-public partnerships.

Fixing South Africa can be done one way only, the industry grouping said, through the government and business working hand in hand.

“The greatest opportunity lies in exploiting private sector participation in public infrastructure delivery through public-private partnerships.”

Against this backdrop, Neasa has called for a stop or reversal of the “illogical interventions by the Department of Trade, Industry and Competition” through the new steel products import duties. It described this as the “only way to arrest the decline in the steel industry” although admitting that “such a policy shift will cause upheaval in the short run, but in the long term, the industry will organically return” to equilibrium.

“Persistent government interference in the steel industry will cause the inevitable slow demise of the industry and the eventual disappearance of ArcelorMittal SA,” added Neasa.

– BUSINESS REPORT