Amsa wants steel import tariffs to be in line with world average

SA’s largest steel producer, ArcelorMittal SA (Amsa), has called for a 25% tariff on imports, saying it is the most appropriate measure to protect the embattled domestic industry.

Amsa, which is beating a path towards recovery, has also lamented the effects of surging electricity costs on manufacturing, while consumption has reduced.

Speaking after the group’s results presentation on Thursday, Amsa CEO Kobus Verster said as China’s exports were forecast to accelerate 24% during the year, many countries that produce steel had acted quickly to enact trade remedies.

He pointed out that following Europe’s example, countries such as Mexico had slapped tariffs on Chinese imports of about 80%, while the US and Brazil imposed a 25% tariff. India, Vietnam, and Thailand had taken similar actions.

SA announced two months ago it would impose an additional 9% safeguard duty on imports of hot-rolled steel from all countries for 200 days, starting on June 28. The provisional safeguard duty, which is levied over and above a 10% general customs duty, has been met with mixed reactions.

Amsa intimated that the temporary measures, aimed at protecting the local industry from the influx of imports and exempting developing countries, were inadequate to ensure sustainable longevity. In addition, the enforcement of the duties was lacking.

“What we have asked for is something that brings us in line with the protection that other countries have imposed. So if you talk about the US it is [about] 25%. Brazil is the same, so typically that is the type of levels that we ask for,” Verster told Business Day. “We think an additional percentage that brings us in line with the world average of about 25% is fair.”

Beneficiation

Verster’s backing for stronger protectionism was supported by group stakeholder management head Tami Didiza, who said it was “regrettable” that SA’s raw material basket had increased, despite SA being a mineral-rich country.

Didiza said, however, it was encouraging that the ministers of the new government of national unity proclaimed their support for mineral beneficiation. “This will significantly contribute to arresting the decline of SA’s steel sector while also sending a strong message of commitment to restore its international competitiveness and relevance.”

The calls for increased protection come as Amsa attempts to stage a recovery, having decided to continue the operations of its steel product operations, preserving 3,500 direct jobs and 80,000 across the value chain.

It reported widening losses at the halfway stage amid difficult local and regional trading conditions, and the effect of interruptions at two blast furnaces at Vanderbijlpark.

It cautioned that while the blast furnace chilly hearth circumstances at Vanderbijlpark in April and May caused a R716m loss, SA’s rising power costs were just as detrimental, despite the recent fall in load reduction.

Reporting that its electricity tariffs had increased 16%, Verster said the double-digit jump was a “major concern” as energy costs were a substantial component of operating expenses.

Total resuscitation

“We use about 1.6-million megawatt hours per year. Five years ago we paid R2bn per year and now we are paying R3.2bn,” said the CEO. “So we are paying R1.2bn more and we consume 9% less electricity now. That is not sustainable.”

He said that as Transnet and Eskom started to improve their short-term operational performance, there was a broader recognition that there needed to be “a total resuscitation of those entities and the liberalisation of that”.

Didiza said that at current levels, electricity inflation in SA was costly and unsustainable, adding that substantial improvements in Transnet’s uncompetitive tariffs were required amid soaring raw materials costs.

Business Day reported earlier this week that minister of electricity & energy Kgosientsho Ramokgopa was leading the charge to address the rising affordability crisis, with the ministry gearing up to undertake a “tariff policy review” that would include a review of tariff structures for Eskom’s distribution business and the newly established national transmission company.

As SA gets closer to a “gas cliff” in 2026, Amsa noted that it was moving forward with its portfolio of high-payback projects, which included installing a billet caster at its New Castle plant that would “bring down costs immediately” in addition to other solutions that would help it reach its goals of becoming gas-neutral.

Amsa shares gained 2.26% to R1.36 on Thursday, having slipped 17% this year.

gumedemi@businesslive.co.za