31 March 2025
Business Day
by Ayabonga Cawe
After months of consultation and engagement with the domestic steel sector, the International Trade Administration Commission (ITAC) gave notice in the Government Gazette of March 19 of a review of the steel tariff structure and import licensing and surveillance mechanisms for the sector.This arises from the risk of trade diversion from growing protectionism in importing markets and chronic structural overcapacity globally.
Much of the reporting that followed the release of the notice requesting comment from interested parties, has focused on whether the process will meet the ambitious deadlines and whether it will slay some holy cows in the multilateral trading system. Those concerns, while relevant, lack the context of a world market for steel that has undergone significant and disruptive change in the past two decades.
In 2004 SA produced about 9.5-million tonnes of crude steel (with the then Iscor accounting for nearly three quarters). Two decades later we produce less than half of that. When Itac undertook a chapter 72 steel tariff review in 2005 after China’s ascent to the World Trade Organisation (WTO), the commission observed that the primary steel industry was performing well in terms of economic criteria.
It was “globally competitive, very much export orientated and [enjoyed] the bulk of the market share in [the Southern African Customs Union]”. Itac went on to suggest that “imports are relatively small and contribute a minor percentage of the domestic market”. None of these assumptions, which led to a decision to reduce tariffs on chapter 72 primary steel products from 5% to zero, still holds true. We are now seized with another review.
Do we undertake it because we are “obsessed” with autarky or, as Peter Bruce suggests, fixated with nostalgia for “siege-focused" apartheid-style industrial policy? Neither. What has changed since 2004 is not that national steel consumption has declined, (it has remained flat at just below 6-million tonnes). Rather, the share of domestic consumption met by imports has grown and export markets narrowed.
Put simply, we produced 3-million more tonnes in 2004 than we could absorb. The excess, a third of what we produced as a country, was exported. Iscor (now ArcelorMittal), exported just under two-fifths (37%) of steel sales in that year. Two decades later, less than a quarter of such sales (23%) came from outside the customs union, while demand has been constrained by a “competitive struggle" in the world market. Disposable capacity, primarily from China and other producers (India and Turkey) has displaced small open market steel producers such as SA.
This is important, as most analysis of our national steel problems overlooks the explanatory power of a rising import share of consumption and the curtailment by geopolitical and corporate intent of market access to export markets. For instance, imports of flat steel products surged from 317,000 tonnes in 2004 to more than 1-million tonnes by 2013. A decade later more than 1.1-million tonnes came in, notwithstanding the reversal of the decision in 2016 to aggressively liberalise tariffs by raising them to 10% (the WTO bound rate) from 0%.
It is clear that tariffs at bound rates and a slew of trade remedies have not been up to the challenge. Which is why the March 2025 notice calls for a consideration of whether this amounts to an “emergency situation" as outlined in article 19 of the WTO Agreement. This is not to eschew multilateralism but to craftily use space within it; to consider how we provide effective trade protection in a patently unfair operating environment. We are not alone in our lamentations.
Last week the EU strengthened its safeguard measures against steel imports, narrowing import quota volumes. On the last day of February, the UK initiated a quota review on exceptions given to developing countries, covering a range of steel products. A few weeks earlier the US reinstated a 25% tariff on steel products. It is concerning that, as we undertake a review to inform how we respond, some wish to cajole us towards resigned despondency, rather than to explore how best to respond.
• Cawe is Chief Commissioner at the International Trade Administration Commission. He writes in his personal capacity.