Govt to support domestic steel companies for tariff protection

14 July 2015

The South African government confirmed on Monday that it would support an application by domestic steel companies for across-the-board tariff protection of 10% – South Africa currently had no duties in place on primary steel imports.

The International Trade Administration Commission of South Africa (Itac) had already received the application and an adjudication process was under way.

Department of Trade and Industry (DTI) deputy director-general Garth Strachan said government was “extremely concerned” about the state of the industry, which was facing intense import competition amid weak domestic and international demand.

International industry body worldsteel warned earlier this year that the industry was facing a “new normal” of low growth, owing primarily to a fall in Chinese steel demand.

 In addition, “excessive” steel capacity created during the boom period meant that exports were surging even though capacity utilisation rates had fallen to below 75%.

The fallout in South Africa had been seen when the country’s second-largest steel producer Evraz Highveld Steel and Vanadium had entered business rescue earlier in the year.

The country’s largest steel producer ArcelorMittal South Africa (AMSA), had repeatedly warned of “difficult trading conditions”, which it said were exacerbated by rising costs and cheap steel imports from China.

AMSA had not yet made “definitive decisions” regarding plant closures, with CEO Paul O’Flaherty confirming that it was in talks with government to find “lasting solutions to the challenges faced by the industry”.

Scaw CEO Markus Hannemann said weak demand from the mining and construction sectors, combined with the slowdown in China and a surge in imports, had translated into “extremely depressed” prices.

But Scaw, which produced steel from scrap, had the added problems of scrap supply and prices, which had remained resilient. Strachan said the DTI was working to ensure that existing measures to prevent the “unfettered” export of scrap metal were tightened, but also hinted to possible additional measures in future.

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