The Competition Commission has published draft terms of reference for the steel industry inquiry, saying it has reason to believe that certain of the sector’s market features impede, distort or restrict competition.
The beleaguered steelmaking industry, linked directly with iron ore mining and the scrap metals sector, is a key strategic industry for SA generating 1.5% of GDP and accounting for 190,000 jobs.
The scope of the inquiry is expected to uncover factors behind SA’s lack of competitiveness in production and supply of steel. SA’s global crude steel production ranking dropped from 14th position in the world in 2014 to 32 in 2021, indicating its competitiveness in steel production and supply is waning.
Employment in the steel industry has also been on a downward spiral with a 35% loss of jobs reported from 2010 to 2019, a problem compounded by the effects of the Covid-19 pandemic.
“The commission endeavours to use competition law and policy in a manner that proactively regulates markets in the steel industry,” it said when it announced the inquiry.
Public comments are invited on the inquiry’s scope on or before Friday, May 5. The steel industry inquiry will start 20 days after publication of the final terms of reference. The final report is to be completed within 18 months.
After completing the market inquiry, the commission will publish a report of the investigation with suggested actions in the Government Gazette. It will submit the report to the minister of trade, industry and competition for consideration.
The two main inputs in the steel value chain are iron ore and scrap metal. Other inputs include coking coal, liquefied natural gas and manganese.
Iron ore miners and scrap dealers supply inputs to steel manufacturers, who convert iron ore and scrap metal into steel products for use in sectors such as construction, mining and automotive manufacturing.
The commission said its probe will look closely at the two levels of the steel value chain, the raw materials and inputs, as well as the upstream steel production level. It will focus on the effect of these value-chain levels on the local downstream steel market.
The authorities said iron ore production and pricing will also be in the spotlight as the inquiry assesses the challenges of iron ore miners.
“The commission is of the view that the steel industry inquiry targeted at inputs and upstream level of the value chain may assist in identifying and addressing some of the features that may be distorting competitiveness and/or competition in the steel industry,” it said in the government gazette.
A recent survey by the Steel & Engineering Industries Federation of Southern Africa (Seifsa) shows that the energy crisis also contributed to a rise in input costs, job cuts and production declines among companies.
This pushed the industry body to further revise its forecast of a 2.2% narrowing in production to 5.3% for 2023.
Moreover, the ripple effects of above-inflation rises in electricity tariffs and load-shedding stalled investment of R2.5bn in the sector.
The commission has held inquiries into healthcare, retail, online shopping websites, liquefied petroleum gas, passenger transport and banking. A fresh produce market inquiry is under way.
These inquiries typically take more than two years and require extensive legal submissions from industries involved, making them costly for the sector under investigation.
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