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Steel linked to South Africa’s growth

Johannesburg – ArcelorMittal yesterday warned of the dire consequences for the government’s growth aspirations if the local steel industry collapsed.

A combination of low prices, rising costs and a threat from cheap Chinese imports have pinned the local steel industry against the wall. Steel producer Evraz Highveld Steel and Vanadium is one of the companies that has already gone bust.

To get breathing space from the influx of imports, local steelmakers have asked the government to impose 10 percent import tariff duties on various steel products.

The International Trade Administration Commission (Itac) of South Africa has approved all the applications, but tariffs duties on hot rolled coil and other bars and rods have yet to be implemented.

Mending bridges

“We have worked hard to mend bridges with government and regulators, in which our story to protect the steel industry has been heard,” ArcelorMittal South Africa chairman Mpho Makwana said.

According to ArcelorMittal, securing domestic steel supply was necessary to execute the government’s infrastructure development plans.

“In developing countries, such as ours, there is a positive correlation between GDP (gross domestic product) growth and steel intensity. As we grow the economy, we will need more steel,” Makwana said.

ArcelorMittal’s 2016 Factor Report, launched yesterday, said if the local industry collapsed, it would take 10 years to re-establish the infrastructure, skills, logistics network and downstream industries required for a viable and thriving local steel industry.

ArcelorMittal said while steel consumption had decreased by 0.4 percent a year over the past five years, imports had increased by 20 percent. Imports made up 25 percent of local steel consumption, up from 10 percent five years ago.

Steelmaking represented 1.5 percent of South Africa’s GDP and employed approximately 19 000 people, ArcelorMittal said.

Rising costs threatened the local steel industry.

“ArcelorMittal continues to face a significant rise in its costs of production. Last year, the total cost was R31.3 billion. The largest share of this, representing a total of R12.8bn, is attributed to iron ore, transport costs from Transnet and energy costs from Eskom, representing 42 percent of the costs,” Makwana said.

Cheap imports

ArcelorMittal claimed the surge in cheap foreign imports came mainly from China, where steel was state-subsidised, which constituted 56 percent of all South Africa steel imports last year.

Reduced activity, production and investment in the key construction, mining and manufacturing sectors had also hurt the local steel industry, Makwana said.

The three sectors represent almost 80 percent of the total steel demand in South Africa. “While (the steel industry) plays a significant role for these three key sectors, its survival depends on how these industries are performing.”

Meanwhile, Makwana has confirmed that the Saldanha steel export facility will continue to operate.

ArcelorMittal acting chief executive Dean Subramanian said yesterday that the weaker rand and a rise in West African steel demand had improved the plant’s viability.

ArcelorMittal shares on JSE were yesterday down 5.48 percent at R8.79.

 

Source – IOL