Downstream suppliers say they must be focus of revival efforts
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AS THE GOVERNMENT prepares to launch a Steel Master Plan to improve the competitiveness of the industry, downstream fabricators and manufacturers have called for the relaxation of tariffs to help them stay afloat.
Marketing manager at Duferco Steel Processing, Nico Van Wyk, said for the industry to become competitive, the downstream suppliers had to be the focus of the government’s efforts to revive it.
Van Wyk said the 18 percent duties on hot rolled coils steel was squeezing the downstream steel sector. He said Duferco, which competes with South Africa’s primary steel producer ArcelorMittal SA (Amsa), relies on hot rolled coil imports to sustain its export market. “The government does allow us to import hot roll coils, convert them, and export them without paying duties,” Van Wyk said. But if we have to supply to the local market we have to pay the duties we do not get exemption. The 18 percent that is effective on the hot roll coil imports unfortunately neutralises us in the domestic market. As from January this year up until September we have not been supplying the domestic market on a regular basis with hot dipped galvanised coils or cold rolled coils because of the duty.”
Trade Industry and Competition Minister Ebrahim Patel is expected to launch the Steel Master Plan in Germiston today amid challenges including the supply shortages facing the downstream industry and an extension of the current 8 percent steel safeguard duties.
Flat and long steel products are subject to a 10 percent protection, but certain flat steel products are subject to an additional 8 percent duty.
Van Wyk said import duties on hot roll coil was preventing Duferco from supplying the domestic market that has been grappling with a shortage since the Covid-19 pandemic.
He said that Duferco had lodged an urgent application for exemption on hot roll coil tariffs at the International Trade Administration Commission in July last year.
“The longer the delay is with the application, the longer it will take to address the steel shortage in South Africa,” said Van Wyk.
Itac spokesperson Thalukanyo Nangammbi confirmed that the commission had received an application from Duferco. “The matter is now at an advanced stage,” said Nangammbi.
Recently, Amsa chief executive, Kobus Verster said that Vanderbijlpark’s current production was in line with domestic demand and confirmed a backlog existed but that Vanderbilpark could not produce more steel.
“Duferco is not saying that Amsa must resolve the supply shortage on its own. We are saying that we are here to assist, we can supply where Amsa cannot supply, but the duties are preventing that,” said Van Wyk.
Amsa would likely only catch up with the backlog when the market demand dropped off.
Duferco, which produces galvanised coil products for the domestic and the international market, was built on the back of Saldanha Steel Works, a unit of Amsa which converted iron ore into steel and was placed on care and maintenance amid rocketing costs.
It has a supply agreement with Saldanha Steel in which Saldanha supplied hot roll coil which was the equivalent of importing the product without paying the import duty.
“Since the closure of Saldanha Steel, Amsa wanted to supply us from Vanderbijlpark, which is 1400km away … that would mean higher logistical costs,” Van Wyk said.