The International Trade Administration Commission of SA (Itac) has imposed a provisional 52.34% tariff on imports of corrosion-resistant steel coil to prevent “further injury” to the domestic market, in a move that is a major boost to ArcelorMittal SA (Amsa).
The move by the regulator is a win for the embattled steel giant, 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.
Itac said steel coils were widely used in key downstream industries such as construction, roofing and cladding, appliance manufacturing and the automotive and engineering sectors.
“The provisional safeguard duty is a short-term emergency measure imposed before a final determination is made, in order to prevent further injury while the investigation is concluded,” it said. “These provisional measures apply to all countries except those developing countries whose individual import volumes do not exceed 3% of total imports or collectively account for less than 9% of total imports.”
The provisional tariff, which came into force from July, will be in place for about 200 days. The measures came after Itac made preliminary findings that the surge in imports of steel coil was causing “serious injury” to the steel industry in the Southern African Customs Union.
“While other factors such as market contraction, rising input, electricity and transport costs were considered, they did not sufficiently detract [from] the causal link between the serious injury and the import surge,” it said.
“Critical circumstances exist that warrant immediate action to prevent irreparable harm.”
The provisional import duties are part of the government’s wide-ranging review of its tariff structure. 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 review, which is expected to conclude by end-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.
The review zooms in on more than 600 codes, covering anything from primary steel to stainless steel.
Interventionist policies
The government has taken several measures to keep Amsa’s long steel business afloat. It 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 in the long term.
The Industrial Development Corporation, a shareholder in Amsa, has also injected cash into the business.
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 points to the government’s interventionist policies in the steel industry, in which production has plunged 40% below its 2006 peak.
In another move, Itac has increased to 15% the customs duty on transformer cores that have a power handling capacity not exceeding 50,000 KVA. It said this was because it found that “additional tariff support should enable the domestic industry manufacturing the subject products to utilise its existing underutilised production capacity”.
The increase might also lead to a reduction in the marginal cost of production. “The commission recommended that the rate of customs duty on transformer cores, having a power handling capacity not exceeding 50,000 KVA, be increased from 5% to the WTO bound rate of 15% ad valorem,” it said.
“The commission further recommended that the duty be reviewed to monitor the performance of the industry after a period of three years from the date of implementation, or such other period as decided by the commission.”
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