Picture: THINKSTOCK
Picture: THINKSTOCK

SA IS one of the last countries to impose tariffs on steel imports to protect its domestic mills from a flood of cheap metal from countries such as China, according to ArcelorMittal SA.

On December 18, the government gazetted a 10% tariff on a number of imported steel products, but a large number of the applications made by the steel industry last year had yet to be implemented, prompting ArcelorMittal to warn on Thursday that a failure to do so would lead to an industrywide restructuring of the domestic steel sector.

ArcelorMittal, the largest producer of South African steel, along with Evraz Highveld Steel & Vanadium and the South African Iron and Steel Institute applied for and have been granted a maximum 10% tariff on imported wire rod and rebar with effect from 18 December, representing three out of 10 applications made to the International Trade Administration Commission (Itac).

In December, further applications had been made for tariffs on other bars and rods, rebar, hot-rolled coil, cold-rolled coil and plate, ArcelorMittal said.

"(W)ithout the requisite tariffs as applied for … and without the initiatives committed by government regarding the use of local steel for government infrastructure projects, the steel industry and the company will need to undertake significant structural change," ArcelorMittal warned.

The industry employs about 200,000 people.

It is understood the imposition of the tariffs was conditional on domestic mills not increasing the price of their steel.

Itac spokesman Foster Mohale said that he was awaiting the return from holidays next week of officials handling the balance of the applications to get a sense of if and when they would be completed.

ArcelorMittal SA, which is undertaking a R4.5bn rights issue fully underwritten by its parent, the Luxembourg-based ArcelorMittal Group, said it was in advanced talks with the government to designate steel for state procurement for infrastructure projects at an agreed price.

Until the imposition of the tariffs, SA was the only country not to have tariffs on Chinese steel imports, said Henk Langenhoven, chief economist at the Steel and Engineering Industries Federation of Southern Africa.

The implications of the tariff on cheap steel imports for domestic manufacturers should be muted if local mills did not raise prices, said Mr Langenhoven. "The rapid depreciation of the rand will give more protection than the tariffs."

Steel imports surged in the second half of last year, prompting domestic steel makers to appeal to the state for protection from the flood of metal threatening their businesses. The Chinese steel market was swamped with oversupply and this was being sold abroad with disastrous consequences for local steel mills unable to produce metal as cheaply as in China.

In SA, the steel sector has come under tremendous pressure. ArcelorMittal has reported losses for four years as it struggles with rising costs, particularly for electricity, and falling steel prices and sluggish economic growth curtailing sales.

SA’s second-largest steel maker, Evraz Highveld Steel & Vanadium, is in business-rescue process, while Tata Steel’s operation in Richards Bay is being auctioned off. Numerous smaller steel businesses including Alert Steel and Duro Pressings, have recently gone into liquidation.

Globally, steel output from 66 countries rose 1% during 2014 to 1.67-billion tonnes and China accounted for about half of that.