Steel Industry In Great Danger

STEEL INDUSTRY
IN GREAT DANGER

LOOMING SAFEGUARD DUTIES

WHY IS AMSA BEING PROTECTED TO THE DETRIMENT OF THE DOWNSTREAM INDUSTRY?

Your response to the information below could assist in preventing import duties on steel products being in excess of 40 percent.

The International Trade Administration Commission of South Africa (ITAC) has circulated to the World Trade Organization (WTO) the preliminary findings, enclosed herewith, regarding an application, primarily by ArcelorMittal South Africa (AMSA), for the imposition of safeguard duties.

The above preliminary findings form part of the regulatory framework of the WTO, which places an obligation on all WTO members to notify the organisation whenever a preliminary determination of serious injury, or threat thereof, caused by increased imports have been made.

In terms of the aforementioned preliminary findings, no safeguard duties will be imposed immediately, however, there is a real risk that ITAC will soon impose safeguard duties of more than 30 percent on top of the 10 percent customs duty already in place, or impose a quantitative restriction on the importing of relevant products.

It is evident from these findings that the preliminary determination once again favours AMSA and that the representations and objections of the downstream manufacturing industry were ignored. According to the preliminary report:-

ITAC found that a surge of imports occurred, but ignored the facts surrounding this issue. It is a widely held belief in the downstream industry that the main reason for AMSA’s predicament is of its own making.  The preliminary finding does not mention that the surge of imports was sparked by AMSA’s meltdown at Vanderbijlpark, as well as AMSA’s own imports.  Furthermore, we are of the view that AMSA’s unwillingness to lower prices led to a further drop in their market share. AMSA claims that they only had supply difficulty during the Vanderbijlpark meltdown and also when Highveld Steel closed down. This is untrue, since the market is often placed on allocation or just simply informed that AMSA cannot supply the steel required by the market.

The downstream industry should now come forward and present these facts to ITAC and not be concerned about any repercussions from AMSA, notwithstanding them often being the main supplier to downstream manufacturers.

ITAC also found that serious injury occurred, but once again omitted to highlight the contributing factors. AMSA’s antiquated and expensive production costs, caused by their lack of investment, is the reason for them being unable to compete with the rest of the world. Direct rolling technology has been embraced by steel-makers in China and that is why their steel is cheaper – direct rolling only uses 50 percent of the electricity needed in outdated steel-making technology.

In light of the distress that the downstream industry already finds itself in, as well as the potentially devastating consequences of the implementation of further duties, it surely cannot be said that either the initial duties or the potential excessive safeguard duties will be in South Africa’s business and national interest.

BE VIGILANT AND OUTSPOKEN ABOUT THIS MATTER

Unless the downstream industry is vigilant and outspoken about this issue, thereby putting pressure on government to abandon its industry destructive plan (the potential introduction of safeguard duties to protect AMSA), the downstream industry will suffer a slow death.

WE NEED YOUR INPUT

If you are opposed to these duties and in order to enable NEASA to accurately present your case, please comment*, not later than Friday, 5 August 2016, by emailing your views on your company letterhead to Edwin Mkwanazi of DTI (emkwanazi@itac.org.za) and copy me at comms@neasa.co.za.

On 30 August 2016, NEASA will present the effect of the potential imposition of safeguard duties to ITAC.

*We request your comment on the following topics which may potentially affect your business:-

• The effect of the already introduced 10 percent duty in respect of:-

competitiveness, and
employment

• The potential effect of the added safeguard duties of 30 percent or more in respect of:-

competitiveness, and
employment

• With thousands of products involved and smaller companies generally not being able afford to initiate an application in this regard, do you regard protection of manufactured products in the downstream as a viable option?
• What is the effect on your operations of AMSA only being able to partially supply the South African market?
• What is your view on AMSA’s price increases since September 2015?
• What is your view regarding access to cheaper, high-quality imported raw products?

Regards