The review of South Africa’s steel tariff structure set to be undertaken by the International Trade Administration Commission of South Africa (Itac) has been described as the largest ever and is, thus, expected to have far-reaching consequences for the sector and the level of protection provided to industry participants across the value-chain.

Itac chief commissioner Ayabonga Cawe tells Engineering News that a Gazette outlining the scope of the review as well as the process that will be undertaken is likely within weeks, with the contents of the notice to feature on the agenda of the commission’s first meeting of 2025 next week.

He also reiterates Itac’s commitment to public consultations and transparency, indicating that public hearings could be scheduled in light of the broad-based nature of the review and its likely impact.

Initial consultations on the scope of the review have been concluded in line with a directive issued by Trade, Industry and Competition Minister Parks Tau to Itac.

The directive stipulates that the tariff structure for steel products included in chapters 72, 73, 82 and 83 of the tariff book be reviewed, along with other possible import controls, such as quotas or permits.

Describing it as a “flagship” project, Cawe says the outcome will take the form of a recommendation to Tau, who has indicated that he is expecting some initial feedback by June.

Cawe stresses, however, that a final outcome is not anticipated by mid-year, owing to the large scope of the review and Itac’s commitment to public consultations.

During a webinar hosted on the upcoming review, XA Global Trade CEO Donald Mackay described it as an “enormous” project that is likely to take far longer than six months to complete.

There is also much as stake, as chapters 72, 73, 82 and 83 deal with products whose yearly imports have a combined value of R66-billion, of which R30-billion arises in the form of primary carbon and stainless-steel products covered under Chapter 72.

Chapter 73 includes fabricated products such as pipes and wire, Chapter 82 includes tools and equipment, ranging from wheelbarrows and spades to cutlery, while Chapter 83 includes a range of other miscellaneous steel products.

The net duties, after rebates, arising from the import of steel products used in intermediate and final consumption, as well as in gross fixed capital formation has been calculated by XA to be R3.5-billion.

The review forms part of what Cawe describes as a move by Itac to become more strategic and proactive amid expectations that trade instruments are likely to be used more assertively by governments in light of the tariff signals being sent by US President-elect Donald Trump.

He also stresses that while it could result in some products receiving additional protection, it is also aimed at ensuring that tariffs are removed from those products that should not be protected.

HIGH ANXIETY

However, it also comes amid heightened anxiety in the domestic steel sector following ArcelorMittal South Africa’s (AMSA’s) announcement that it would be closing its long products division.

The decision, which will affect 3 500 direct and indirect jobs and which could threaten tens of thousands more in the downstream value chain, has been attributed to structural conditions that are undermining the competitiveness of AMSA’s Newcastle Works, in KwaZulu-Natal, and its associated long units in Mpumalanga and Gauteng.

Although logistics and energy have been identified as key factors, rising imports from China and a government scrap policy intervention have been highlighted as two key reasons for the decision, particularly given persistently weak domestic demand.

Mackay calculates that the price preference system, which provides domestic consumers of scrap with a 30% discount, together with a 10% export tax on scrap, has resulted in a transfer of value to mini mills of some R8.5-billion and has enable them to reduce their costs to below those that can be achieved at Newcastle.

In addition, he estimates that the State-owned Industrial Development Corporation has a R14-billion exposure to the mini-mill sector, further raising the financial stakes associated with any reversal of the policy.

These domestic interventions, he says, have been a bigger driver of AMSA’s decision to close its longs business than import competition, which is being partially offset through safeguard and antidumping measures.

While listing various possible government interventions that could facilitate a reversal in AMSA’s closure decision (these range from likely changes to the scrap policy and the designation of local steel in government projects, to the unlikely scenario of nationalisation), Mackay also highlights the immediate risks to downstream consumers of AMSA’s long products that he says need to be addressed.

“In our view, government should swiftly create a comprehensive set of temporary rebate items to cover all long steel, subject to the usual permit requirements,” he says, arguing that without such an emergency measure downstream fabricators will likewise become vulnerable.

He is also concerned, however, that the crisis associated with the closure of AMSA will cause panic that could, in turn, lead to decisions with serious and negative unintended consequences.

“The scale of the problem in the sector lends itself to high-risk outcomes.”

Therefore, he urges companies in the steel industry to prioritise participation in the upcoming review as a way of ensuring a more balanced outcome.