SA is 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.
The International Trade Administration Commission (Itac) has been tasked by trade, industry & competition minister Parks Tau to re-evaluate the country’s tariff framework.
The review, which Itac told Business Day was expected to conclude by the end of July, might also lead to the introduction of import controls for certain products and the possible creation of rebate provisions for the duty-free importation of input products used in manufacturing activities.
Itac said emergency action was needed to protect SA’s steel industry from cheap imports flooding the market.
The review will zoom in on more than 600 codes, covering anything from primary and stainless steel.
Donald MacKay, CEO of XA Global Trade Advisors, called the scale of the trade-offs “staggering”, saying that higher tariffs and import permits on 61% of imports could create a seismic shift in trade.
“My concern is not with the scope so much as all of this is happening in a single review. It’s like everything which was not done in the steel sector in a decade is now being done in a month,” MacKay said.
“This is R67bn worth of imports, 355 of those tariff codes are being considered for a duty increase, adding R1.76bn to the tariff bill if they are all approved. Three rebates (duty exemptions) might be removed, costing the 24 importers who use these rebates R87m in duties per year if they go,” he said.
“Import permits are being considered for 61% of all steel imports. In other words, it’s not just about the tariff any more. You may be faced with a simple refusal to be allowed to import.”
Itac is also investigating the possible introduction of an import surveillance system for steel products classifiable under the Customs and Excise Act.
The goods include iron and steel products, articles of iron or steel, tools and cutlery, and articles of base metal.
“The extent to which the challenges faced in relation to an influx of low-priced imports arising from global structural overcapacity constitutes an ‘emergency’ situation ... necessitating emergency action; including as envisaged in article XIX of the General Agreement on Trade and Tariffs (Gatt),” it said in a government notice.
The World Trade Organisation’s Gatt gives countries the green light to temporarily restrict imports if they face a surge in imports that cause serious injury to domestic players.
The urgency of the matter was underscored last week when the government stepped up at the last minute to defer the closure of ArcelorMittal SA’s (Amsa) long steel business — a move that could potentially save 3,500 jobs.
The government will take over the salaries of Amsa’s embattled long steel unit for at least 12 months while it works with the company on solutions to keep the business afloat for the long term.
The Industrial Development Corporation, a shareholder in Amsa, has also injected cash into the business.
Amsa sent the government and other stakeholders into a panic earlier this year when it announced the closure of its plants in Newcastle and Vereeniging.
The closure of the two plants, alongside the ArcelorMittal Rail and Structural unit, located at the old Highveld Steel facility in Mpumalanga, would have resulted in 2,200 direct job losses and a further 1,300 indirect jobs affected.
According to Amsa’s latest annual report, Newcastle alone accounted for 34% (more than R10bn) of its total procurement in 2023.
Itac said one of the reasons behind the review was that the worldwide steel production overcapacity and increased trade protectionist measures implemented by some countries were contributing to challenges faced by SA’s steel industry.
“Persistent local conditions of slow economic growth, depressed demand [and] energy and freight logistics challenges are further exacerbating this problem,” it said.
“While a number of initiatives are being implemented through the steel and metal fabrication master plan, additional trade policy instruments may be necessary to ensure the facilitation of our industrialisation objectives and socioeconomic goals, which are supportive of our domestic steel production capabilities and jobs.”
SA’s steel industry has bled 25,000 jobs since 2009 — losses that continued after the introduction of the price preference system more than a decade ago, a report by independent economic research consultancy Econometrix shows.
The report, released last month, points to the government’s interventionist policies in the steel industry, in which production has plunged 40% below its 2006 peak.
The data shows that about 7,500 jobs were lost in the sector since 2014 after the introduction of the price preference system the previous year.
The policy regulates the export of ferrous and nonferrous scrap by not allowing the exportation of scrap metal unless it has first been offered to domestic consumers at a discount to the international price at the time of sale.
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