Steel tariff boosts Amsa’s prospects

SA’s largest steel producer, ArcelorMittal SA (Amsa), has received a shot in the arm after the government imposed a 9% duty on imports of hot-rolled steel products.

Hot-rolled steel is used on railroad tracks and construction projects. The tariff comes as Amsa is trying to find its feet amid dwindling demand for steel.

The 9% duty will be applied to hot-rolled steel imports from anywhere in the world.

The International Trade Administration Commission of SA (Itac) launched a safeguard investigation into hot-rolled steel after the SA Iron & Steel Institute (SAISI), representing Amsa, filed the application. Amsa is the primary producer of these products in the Southern African Customs Union (Sacu).

SAISI secretary-general Charles Dednam told Business Day the safeguard application was in reaction to the extensive hot-rolled steel imports coming into the country.

“Total imports in 2023 came to 1.3-million tonnes, of which more than 50% was hot-rolled sheet and plate, while mills report utilisation of 60% and below. Although some imports relate to specifications not offered in SA, measures to apply for tariff exemption have been provided for those instances where products are not available in the domestic market,” Dednam said.

The Itac investigation sought to address the significant increase in imports that have substantially harmed the industry within Sacu. 

Dednam said there were two producers of hot-rolled flat steel in SA: Amsa and Columbus. “We do not know what the impact on these two producers will be, but we hope that the measures will localise imports to their benefit,” he said. 

In its application, SAISA alleged that unforeseen developments led to a surge in imports of hot-rolled steel products, which SA has resisted.

Chinese steel producers are aggressively exporting products due to excess capacity and an economic slowdown at home.

According to Trade & Industrial Policy Strategies (TIPS), SA’s demand for steel has been essentially stagnant for the past three decades. The long-term stagnation reflects a persistent decline in the steel intensity of the country’s GDP, according to research by TIPS.

In 1976, SA used 38-million tonnes of steel per trillion rand of GDP, in constant 2022 terms. By 2022, that figure had fallen by more than two-thirds to 12-million tonnes per trillion rand of GDP.

SA’s steel industry is also facing a threat from the EU’s carbon border adjustment mechanism (CBAM).

CBAM — the EU’s tool to put a fair price on the carbon emitted during the production of carbon-intensive goods entering the bloc — is due to be phased in from 2026 to 2034, and will initially cover imports of iron and steel, cement, aluminium, fertiliser, hydrogen and electricity.

The SA Reserve Bank has warned that CBAM could slash SA’s exports by a hefty 10% by 2050 — wiping out about 2.6-million jobs in the process.

With Kabelo Khumalo

majavun@businesslive.co.za