DTI promises fast tracked support for downstream steel industry

17 Feb 2017

Engineering News, 17 February 2017
By Anine Kilian

The Department of Trade and Industry (DTI) insists that measures to support the downstream steel industry in South Africa are a priority for government and are being fast-tracked.

In a statement outlining the various interventions undertaken since 2015 to support a primary steel sector wracked by global oversupply, falling prices and increased imports, the department said the long-term viability of the full steel value chain was “paramount”.

“The downstream, labour-intensive sectors of our economy remain a priority with measures to support these industries being fast-tracked through the collaborative efforts of government departments and its institutions, including the International Trade Administration Commission of South Africa (Itac), the South African Revenue Service and the Industrial Development Corporation.”

Itac initiated investigations in the second half of 2016 on a number of downstream steel industry products, including wire products, screws, bolts and nuts, tube and pipe fittings, appliances; prefabricated structures, grinding media and roofing products. It expects the investigations to be finalised during the first quarter of 2017.

In parallel, Itac is processing applications from ArcelorMittal South Africa (AMSA) for the introduction of safeguard protection on hot-rolled and cold-rolled coil, which would be additional to the 10% protection implemented on a range of primary steel imports over the past year. AMSA made additional input to Itac justifying its request this week and has also initiated a process to support its customers in seeking safeguard protection from cheap imports.

The DTI statement follows Trade and Industry Minister Dr Rob Davies’s insistence that South Africa be “resolute” in using tariffs to defend domestic industry and support industrial development, particularly in light of moves towards greater protectionism in other countries.

In his contribution to the State of the Nation debate, Davies said trade policy was subordinate to industrial policy and South Africa would, thus, not hesitate to use trade remedies, including the use of tariffs to support domestic industry.

The DTI has also justified its support for the upstream steel sector on the basis that steel is “by far the most important input into manufacturing” and that the “steel value chain is paramount to achieving the objectives set out in the Industrial Policy Action Plan and National Development Plan”.

“A competitive steel industry that can support investment, increased jobs and exports remains a key priority for government.”

It also stresses that “reciprocal conditions” have been attached to its support, including commitments to investment, a competitive pricing policy, job retention and industrial output.

“Compliance is independently monitored and evaluated by the Itac steel committee, consisting of Itac commissioners, representatives of the downstream and upstream steel industry and invited government officials.”

AMSA CEO Wim de Klerk has argued that additional safeguard protection is required in light of the implementation of high levels of protection in more than 70 other steel producing countries, which will make the 10% protection already granted ineffectual.

De Klerk says the fact that imports fell only marginally in 2016 to 1.1-million tons from 1.3-million tons in 2015 is evidence that the 10% protection is “not moving the needle”.

“With 75 countries instituting heavy antidumping penalties against China, I fear that those countries with no protection will be targeted, with [China’s] 200-million overcapacity. And we fear that we will see more and more imports into Africa, the market we are also targeting, and South Africa as well. Hence our drive to protect the local industry.”

He also insists that the pricing formula agreed with government for flat steel products will prevent it from simply incorporating the protection gained from safeguards directly into its domestic prices. “We have come to an agreements whereby we are effectively price regulated.”

Nevertheless, opposition remains, with some steel consumers warning that their businesses, as well as their employees, will be placed at risk should government agree to further protect the upstream industry.