Steel producers Cape Gate and Scaw accuse the industry’s major, ArcelorMittal SA (Amsa), of predatory pricing by slashing prices of long steel products after receiving a generous bailout from the government earlier this year.
Cape Gate and Scaw on Monday asked the Competition Tribunal to interdict Amsa from charging prices below market rates to kill off competition in the long run.
At the heart of the complaint by the two companies is that after receiving R1.7bn from the state-owned Industrial Development Corporation (IDC) in April and scoring R417m wage subsidies from the government, the company began reducing its prices for long steel products.
The companies argue that this was done despite the rest of the industry hiking prices “due to a chronic shortage of scrap metal”.
Amsa is accused of intentionally forgoing profit in the short term “in order to weaken or exclude rivals to secure higher profits in the longer term due to reduced rivalry”.
If proven true, this would be an indictment of the management of Amsa, who last month said they might yet close their long steel plants, after the R1.7bn loan they got from the IDC to keep the unit afloat ran out.
The IDC facility in April saw Amsa defer the winding down of its long steel business while a viable and sustainable long-term solution was sought — a decision that saved about 3,500 jobs.
However, the JSE-listed group last month put further pressure on the government to do more to clamp down on cheap imports, a request that is likely to be met with pushback from importers on the grounds that Amsa’s real headaches lie in higher electricity prices and a log-jammed rail network.
🏗️ Steel Showdown
🚨 Allegations
- Amsa used R1.7bn bailout + subsidies
- Cut prices below market rates
- Rivals: “Predatory pricing”
📉 What’s at Stake
- 3,500 jobs tied to long steel
- Products: rebar, rails, wire rod
- Closure would hit construction & mining
🔥 Pressures
- High power costs
- Rail failures = R300m losses
- Scrap shortage
- Cheap imports
⚠️ Risks
- Monopoly if rivals fold
- Bailouts distort competition
- Potential long-term price hikes
🏛️ Policy Test
- Can SA rescue steel without killing rivals?
- Tribunal ruling could reshape industrial policy
Amsa said it had spent just more than R300m in unplanned transport costs due to locomotive failures.
The company said at the time that the long steel business would only be able to “continue with financial support as the company does not have the ability to bear any further financial risk associated with its continued operations after the deferral period”, calling for urgent action to save the unit.
“Therefore, unless a solution is implemented timeously, and to ensure the orderly closure of the longs business as soon as possible after the deferral period, Amsa may have no option but to take certain operational steps to prepare for the wind-down process well in advance of September 30 2025.”
The accusations by Cape Gate and Scaw, if proven true, are likely to worry authorities and the IDC that the financial assistance extended to Amsa was used to undercut the market instead of reviving the fortunes of the long steel business.
The IDC used to own a large chunk of Scaw, until recently when it sold it to Barnes Southern Palace. The IDC bought a 74% stake in Scaw from Anglo American for R3.4bn.
Coincidentally, Amsa has accused freight and logistics group Transnet of abusing its market dominance and charging excessive prices to the detriment of customers. To this end, Sub-Saharan Africa’s only primary steel producer has dragged Transnet to the Competition Tribunal for recourse.
However, it is a tall order to convince the tribunal of the merits of its complaint after the Competition Commission threw cold water on the complaint. The decision by the commission forced the steel producer to resort to self-referral of its complaint to the tribunal.
Should the tribunal agree with Amsa’s stance, some of the penalties open to it include ordering the logistics group to cease its market dominance activities and an administrative penalty of up to 10% of the firm’s annual turnover.
Amsa last month reported a loss of R1bn in the six months to end-June.
The company further said it was not in a position to repay the IDC loans for the “foreseeable future”, adding complication to the due process the IDC has embarked on, the outcome of which is critical to Amsa’s survival, particularly its long steel business.
Long steel products include rebar, wire rod, merchant bars, rails and sections. The long steel business constitutes about half of Amsa’s business, but has racked up losses of more than R1.5bn since 2023.
Winding down the longs business will have profound effects on suppliers, communities and municipalities in KwaZulu-Natal, Gauteng and Mpumalanga.
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