Eskom downgrade has AMSA CEO worried about steel

15 June 2017

With ratings agency Moody’s Investors Service cutting State power utility Eskom’s credit to two notches below investment grade on Wednesday, ArcelorMittal South Africa (AMSA) CEO Wim de Klerk expressed his concern about the downgrade’s impact on the local steel industry.

At a steel industry workshop focused on the 12% safeguard tariff on hot-rolled coil, starting in July, De Klerk highlighted that the economy was in trouble.

“I spend a lot of time talking to government, trying to find out where the major projects are. Money is needed to fund those projects,” said De Klerk, adding that the downgrade would result in government funds having to be set aside for guarantees to secure loans for Eskom.

“Globally, China is the largest steel producer with a massive oversupply. It is also the world’s largest steel exporter [and is] taking away South Africa’s traditional export markets . . . We can’t beat China’s prices,” he said.

De Klerk further noted that 18 countries had trade cases against Chinese steel imports, while 27 countries had started trade investigations into the Asian nation.

The AMSA CEO added that, in South Africa, Chinese imports were up six-fold in six years.

“There’s a belief that trade is making money and that is not true. Government is aware of these problems, trends and job losses,” said De Klerk.

De Klerk said AMSA made a mistake while negotiating two years ago.

“We started safeguard tariff negotiations to protect ourselves . . . without thinking of the industry as a whole. We didn’t ensure that knock-on effects were felt downstream,” he said.

De Klerk further noted that AMSA had broadened its approach and the intention is to collaborate with downstream customers for industrywide protection.

De Klerk further highlighted how important it was for industry to work together, noting that AMSA was ready to assist industry participants in pursuing greater protection for the downstream industry.

He also insisted that additional safeguards were required to protect the domestic steel industry – upstream and downstream – as the current levels of protection were not enough to stem the influx of imports. 

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