AMSA vs the Steel Downstream

… and the Trump factor

WHAT MAKES SOUTH AFRICA DIFFERENT?

The whole world, including role players in South Africa, is up in arms about President Donald Trumps’ introduction of 25 percent import duties on steel.

According to Trevor Kincaid, for Reuters, this step can, among others:

• unravel the global trading system;
• raise prices on basic goods;
• make American businesses less competitive; and
• drive a wedge between the US and its European allies.

Economists agree that these duties, while protecting US steel companies, will lead to increased costs for US consumers and to more jobs lost than saved. ‘There are many, many more US manufacturing workers who would be adversely affected by tariffs than workers who would benefit from them’, according to Justin Fox, writing for Bloomberg.

In respect of the prevailing 22 percent duties in South Africa, aimed at keeping AMSA operating, all these factors find application – obviously within a different context and unique outcomes. The point is this: duties are detrimental, whether implemented in South Africa, in the USA or elsewhere.

The risk to South Africa of losing US market share is real and cannot be replaced with other export markets – as a result of already lower price competition in those markets. Equally, more cost effective competitive mills will now shift their focus to find replacement markets, which would include South Africa and Africa, beckoning the question: would AMSA need even more protection? What makes the South African situation far worse is that AMSA is a monopoly with vastly higher production costs than the world average.

One difference between South Africa and the US is this: while the worlds’ protest might cause Trump to consider exemptions (in fact already has), the plight of the South African downstream has gone unnoticed by the global steel industry, and locally deliberately disregarded by the dti, ITAC and AMSA.

Ludicrously, all this more affordable, high-quality steel, now needs to find markets, but will be prevented from entering South Africa – as a result of the duties protecting AMSA. The Downstream desperately needs this steel to stimulate growth in the South African Steel Industry, which will contribute towards stemming the tide of persistent job losses.

ITAC should not procrastinate in removing the 22 percent duties currently in place. This is a golden opportunity which should not be missed.

It remains our expectation that, in the not too distant future, AMSA will be forced to partially close down – as a result of global and local economic realities. This is long overdue due to AMSA’s antiquated technology and high production cost.

When will common sense eventually prevail?

Kind regards