The CEO of the National Employers’ Association of SA (Neasa), Gerhard Papenfus, said the government was throwing money at a problem by continuing to protect and subsidise ArcelorMittal SA (Amsa), suggesting the state must leave the country’s primary steel producer’s fate to market forces.
Neasa represents about 1,800 businesses employing 65,000 workers in the engineering sector.
Papenfus was reacting to a market update by Amsa on Monday that it might still yet close its long steel plants in Newcastle and Vanderbijlpark by September.
“While the government has introduced excessive measures to protect Amsa, the steel industry has deteriorated as a direct result of the restrictions that these government measures have placed on its ability to access affordable steel,” Papenfus said.
“Amsa has blamed the weak local steel demand and consumption as a major contributing factor to its downfall, with so-called cheap imports,” he said.
“However, what it fails to admit is that its own inability to supply steel or to do so at affordable pricing, while effectively preventing its customers from importing, are major contributors to the decline of its own customer base.”
He set the government’s support for Amsa at nearly R3bn over the past year. This includes about R1bn from the state-owned Industrial Development Corporation (IDC) in a working capital facility, and R380m more from the IDC and the department of trade, industry & competition in a shareholders’ loan.
The IDC in March followed up with another R1.68bn facility that enabled Amsa to defer the closure of its long steel plants in Newcastle, Vereeniging and Mpumalanga, a move that would have led to 3,500 job losses.
The IDC facility is repayable by agreement between the parties and subject to among other things the financial performance, solvency and liquidity of the longs business.
The temporary employee/employer relief scheme also approved funding of nearly R417m to pay salaries of employees at the unit over the next 12 months.
Papenfus said this assistance, with “extensive and ever-increasing import and safeguard duties”, have come to naught, urging the country to prepare for a future without Amsa.
“Though it may prove challenging to operate optimally without the primary steel producer initially, this is a challenge that the industry will have no choice but to overcome, because, at the current rate, Amsa is no longer a long-term option,” Papenfus said.
“The longer the Amsa corpse is propped up, the quicker the downstream will wane. So, the longer it takes for the inevitable to realise, the less of the downstream will survive,” he said, adding that mini-mills will fill the gap left by Amsa’s presence.
“For the steel downstream to survive, let alone prosper, it needs a reliable provider of affordable, high-quality steel. Amsa, most certainly, is not that.”
Earlier this month, the International Trade Administration Commission of SA (Itac) imposed a provisional 52.34% tariff on imports of corrosion-resistant steel coil in a bid to prevent “further injury” to the domestic market.
The move by the regulator was seen as a win for Amsa, which had asked for remedial action to be taken by authorities, decrying increased imports of corrosion-resistant steel coil. The application by Amsa was supported by Safal Steel.
SA is also rolling out its most extensive review of steel tariffs in more than 20 years — in a process that might lead to an increase in customs duties and stringent import controls to protect the embattled local industry.
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