Call to scrap steel import tariffs in SA

31 Aug 2016

Business Report, 30 August 2016
By Dineo Faku

Johannesburg - The National Employers’ Association of South Africa (Neasa) plans to submit reasons why steel import tariffs should be scrapped at a hearing before the Industrial Trade Commission of South Africa (Itac) scheduled for today.

The public hearings are aimed at investigating whether import tariffs on flat hot-rolled steel products would be in the public interest. This as major steel producers were granted import tariffs of up to 10 percent on steel on primary steel products, after being rocked by the influx of cheap Chinese steel and low prices, with steel producer Evraz Highveld Steel and Vanadium having gone out of business.

However industry body, Neasa, which represents 2 500 small businesses in the sector, is opposed to the duty. It also wants Itac to turn down the application by South Africa’s biggest and sole steel producer, ArcelorMittal South Africa (Amsa), for an additional 30 percent safeguard duty on imports.

Neasa chief executive, Gerhard Papenfus, blamed Amsa for failing to upgrade their out-dated plants and instead convinced government to introduce the tariffs when Chinese steel was preferred by the steel industry. “The 10 percent customs duty which was introduced last year already serves as a slow poison, killing the downstream industry.

“It prevents the downstream industry from being able to defend its market share against cheaper imports of finished products,” said Papenfus. He said Neasa wanted all tariffs to be scrapped and the industry to adapt to a new reality of China as the new steel reality. “Protectionist measures are, at most, a temporary solution, delaying the inevitable.”

“If Amsa succeeds in convincing government (or Itac, which is tasked to make a decision in this regard) to introduce the further safeguard duties which they have asked for, they (Amsa) will to a large extent succeed in using the downstream industry as a buffer to protect their old ineffective steel mills against good quality, more affordable Chinese steel.

“Since the downstream will not be able to import, there won’t be any pressure on Amsa to upgrade their steel plants in order to become more effective.”

 Devastating effect

“If we don’t protect the country’s steel industry, the industry might lose more than 20 000 jobs and this will have a devastating effect on the economy,” said Papenfus. He said contrary to claims that the company sought protection via tariffs and safeguard, yet increased prices, the steel prices were determined by factors such as markets. “Therefore, there is no correlation between tariffs, safeguard and steel prices,” Papenfus said.

Itac’s chief commissioner, Siyabulela Tsengiwe, said several parties had been consulted on the import tariffs. The increase in import tariffs on primary steel products from zero to 10 percent, between September 2015 to June 2016 was as a result of rigorous investigations conducted by Itac, in which all interested parties had ample opportunity to make their submissions,” said Tsengiwe.