ArcelorMittal SA's Vanderbijlpark plant. Picture: FINANCIAL MAIL
ArcelorMittal SA's Vanderbijlpark plant. Picture: FINANCIAL MAIL

TRADE and Industry Minister Rob Davies has revealed details of a proposed pricing committee or task team that would monitor ArcelorMittal SA’s implementation of pricing principles agreed to with the state.

The committee would comprise government representatives, steel industry experts, and the primary and downstream industries.

Mr Davies disclosed the plan in a letter to Democratic Alliance MP Dean Macpherson, who had written to the minister to highlight a price increase imposed by ArcelorMittal, the country’s largest steel producer, this month.

The increase was in breach of the company’s undertaking not to raise prices if the government imposed tariff duties on cheap Chinese steel imports.

Mr Macpherson found the new initiative of establishing a pricing committee or task team "quite extraordinary" as it was not part of the deal reached by the department with ArcelorMittal SA.

Mr Davies said he was told the company hiked prices on the back of the weakening exchange rate and the fact that 35% of its input costs were dollar-based.

The minister noted that one of the conditions for tariff adjustments on steel product imports was that ArcelorMittal SA agreed on pricing principles.

The department has been in talks with the company for more than a year on these principles.

Mr Davies said in his letter that the objective of the talks "is to ensure that future price increases will be based on the principles/mechanism agreed to with the government monitored through the pricing committee".

The pricing principles would aim to support the interests of the downstream, steel and labour-intensive manufacturing sectors.

The International Trade Administration Commission (Itac) approved a hike in customs duty on galvanised and colour-coated steel, which took effect in September last year, and on wire-rod, rebar and structural steel, which was implemented in December.

Tariff amendments on semi-finished steel, steel plates, cold-rolled steel and steel sections took effect from last Friday and Itac is investigating the state of hot rolled coil, and other rods, bars and forges.

The measures taken by SA were similar to those deployed by both developed and developing economies across the world as they tried to protect and save their domestic steel industries.

"The global steel industry is in turmoil due primarily to a slump in demand, especially from the People’s Republic of China, huge installed overcapacity and a surge of imports at unsustainably low prices," Mr Davies said.