Johannesburg, 19 February 2018 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) is extremely concerned that the quandary of the local steel industry will continue to worsen in 2018, if the U.S Commerce Department’s recommendation for a tariff of at least 53% on all steel imports from 12 countries – including South Africa – is accepted, SEIFSA Chief Economist Dr Michael Ade said today.
The US’s Department of Commerce recommended the imposition of the tariff rate on all imported steel products from Brazil, China, Costa Rica, Egypt, India, Malaysia, Russia, South Korea, South Africa, Thailand, Turkey and Vietnam, in addition to any anti-dumping or countervailing duty collections applicable to any steel products from those countries. All other countries would be limited to 100 percent of their 2017 import level.
According to the Global Trade Analysis Project (GTAP) Model, produced by Purdue University, a 53% tariff on all steel imports from the aforementioned countries would be expected to reduce imports by 13.3 million metric tons from 2017 import levels from the targeted countries. This action would enable an increase in domestic production in the U.S. to achieve an 80% capacity utilisation rate at 2017 demand levels (including exports). The countries identified are projected to account for less than 4% of American steel imports in 2017.
In January this year, the U.S. Department of Commerce announced an affirmative final determination in the anti-dumping duty (AD) investigations of imports of carbon and alloy steel wire rod from South Africa and Ukraine. This followed parallel investigations launched in October 2017 by both the U.S Department of Commerce and the U.S International Trade Commission (ITC) to determine if American producers had been harmed by carbon and alloy steel wire rod imports from Italy, the Republic of Korea, South Africa, Spain, Turkey, Ukraine and/or the United Kingdom.
For the South African investigations, the U.S Department of Commerce assigned a dumping rate of 142.26 percent for the entity composed of ArcelorMittal South Africa Limited, Scaw South Africa (PTY) Ltd (also known as Scaw Metals Group) and Consolidated Wire Industries, based on adverse facts available due to these companies’ alleged failure to respond to the Department’s requests for information.
The ITC is scheduled to make its final determination on or about 22 February 2018. If the ITC makes an affirmative final determination that imports of carbon and alloy steel wire rod from South Africa and/or Ukraine materially injure, or threaten material injury to the domestic industry, the US Department of Commerce will issue anti-dumping orders. Should the ITC make negative determinations of injury, the investigations will be terminated.
SEIFSA raised its concerns last year about the initial investigations and commented that it was just a tip of the iceberg, with the possibility of anti-dumping duties being extended to other domestic steel products. The Federation also highlighted the potential for retaliation from many overseas trading partners in order to protect their steel industries.
Dr Ade said although the initial indications were for possible tariff imposition on selected steel products from SA, it now appeared that the U.S Commerce Department was advocating for the imposition of a blanket tariff on all SA steel exports.
“This is really a matter of enormous concern to SEIFSA, since the latest developments have the potential of further dampening production in the local steel industry, reducing steel exports to the U.S, squeezing margins and depriving the steel industry of much-needed foreign reserves. Imports of Carbon and Alloy steel wire rod by the U.S from South Africa was valued at an estimated $7.1 million,” Dr Ade said.
He said this situation was further compounded by a low domestic growth scenario which did not augur well for local steel production. He said that for growth in apparent steel consumption to be sustainable, the overall economy’s GDP has to grow by at least 5% – and the South African economy has not grown at those levels since 2007.
Dr Ade said the high uncertainty in steel production and imported input cost, which was sensitive to exchange rate volatility, was of particular concern. He feared that widespread protectionism of steel products might lead to trade wars and further price spikes in the raw materials used in everything from autos manufacturing to household appliances and construction. Of particular concern has been the high uncertainty in steel production and imported inputs cost, which is sensitive to exchange rate volatility.
“The recent developments in the U.S are of grave concern to SEIFSA, given the strategic importance of the local steel industry. SEIFSA supports any collective initiative aimed at addressing the situation and lessening the effects of a final decision by the U.S Department of Commerce on SA steel producers,” concluded Dr Ade.
SEIFSA Chief Executive Officer Kaizer Nyatsumba said although the Federation also called for the imposition of tarrifs on some foreign imports into South Africa, it did so only when it believed there was unfair competition as a result of manufacturing subsidies and export incentives, as is the case with some Asian imports.
Mr Nyatsumba called on the Department of Trade and Industry speedily to engage its US counterpart in a discussion in an effort to resolve this matter.
Issued by:
Ollie Madlala
Communications Consultant
Tel: (011) 298 9411 / 082 602 1725
Email: ollie@seifsa.co.za
Web: www.seifsa.co.za