‘Steel protection cannot lead to price increase’
Department of Trade and Industry (DTI) director-general Lionel October has confirmed that various processes are at an advanced stage to offer greater protection to the domestic primary steel industry, as well as to specify the use of locally produced steel in public infrastructure projects.
He stresses that government will not act in a way that undermines the integrity of independent processes, highlighting that it is up to International Trade Administration Commission of South Africa (Itac) to assess the case for raising duties to the 10% bound levels allowed for under South Africa’s World Trade Organisation (WTO) commitments.
Trade and Industry Minister Dr Rob Davies told a recent meeting of the Presidential Business Working Group that government would back greater protection for the industry, which was facing intense import competition as a result of the current global steel glut. However, he also said government would insist that such protection should not form the basis for an immediate 10% rise in domestic steel prices. Instead the protection should create room for the local industry to win back market share from imports.
Arcelor Mittal South Africa (AMSA), which has submitted a total of 11 tariff applications to Itac, has argued vociferously for increased protection on the basis that it was unable to compete with cheap, “subsidised” steel imports from China.
It estimates that imports supplied up to 30% of domestic consumption during the first half of 2015. October says DTI’s support for raising duties from zero to 10% is premised on the Industrial Policy Action Plan, which insists that changes in tariffs be weighed on the balance of evidence and move either up or down based on the evidence provided.
The DTI believes protection is currently “justifiable” in light of the pressures being faced by the domestic steel industry. The country’s second-largest producer Evraz Highveld Steel and Vanadium is in business rescue, while Scaw has issued a notice of possible retrenchments. Likewise, AMSA has indicated that it could mothball its Vereeniging Works, which could result in job losses.
“The steel industry is basically the core of your manufacturing economy and we cannot afford to lose it. We must have a steel industry in this country – it’s non-negotiable. So we must now protect the industry,” October avers.