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STEEL INDUSTRY: UNLESS THE DUTIES GO, STEEL SHORTAGES ARE HERE TO STAY
STEEL INDUSTRY
UNLESS THE DUTIES GO
STEEL SHORTAGES ARE HERE TO STAY
Over the course of the last few months, AMSA has repeatedly assured both its customers and Government that the backlogs would have been resolved during December ‘20. The situation, however, continued to deteriorate, to the point where it is now an industry-wide crisis. Further assurances were then given that, with the start-up of AMSA’s second blast-furnace, the shortages would be a thing of the past and that AMSA would be able to supply the market. The situation is currently still critical.
Since AMSA’s capacity has been sold out long before the actual closing dates for specific orders, the normal order lead-times have become irrelevant and allocation is done on a day-to-day basis. The backlogs are not being addressed and are to stay for at least the first half of 2021.
Since the shortages have a dramatic effect on pricing, this scenario suits AMSA perfectly. AMSA’s local selling-price is nearly 50% more expensive than the better quality, imported equivalent. In general, as a result of the shortages, manufacturers are so desperate for steel that they pay nearly double for the raw material. This obviously results in a totally uncompetitive manufactured product.
These exorbitant prices, coupled with the duties which deter the importation of the shortfall, suits AMSA equally well. AMSA has, in fact, become so uncompetitive with their antiquated equipment, that only exorbitant selling-prices can save them, albeit, probably, only temporarily.
Government’s relentless support for AMSA by keeping the duties in place is mind-boggling. All AMSA’s undertakings to address the backlogs turned out to be false, yet the DTIC is apparently not in the least deterred by this extremely poor track-record. The DTIC persists on echoing AMSA’s latest undertaking that the backlogs will soon be something of the past.
In this regard, it is important to note that, although AMSA has informed Government that the start-up of the second blast-furnace (late December 2020) will rapidly address the current steel shortages, which is clearly not the case, they did not disclose to Government that they are only running this oven at 50% of its capacity, thereby deliberately prolonging the period during which these high prices are supported by the shortages.
If this is not enough reason to immediately suspend the impact duties, a huge question mark will arise on what Government’s motives actually are.
Regards
We are all in this together.
Privileged and challenged to be South African.
