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HRC

Steel industry to discuss import challenges at June workshop

Consulting firm XA International Trade Advisors will, on June 14, host a workshop for domestic steel industry participants to meet and discuss possible solutions to the threat posed by rising steel imports.

The workshop will look at the trend of increased global protection in the steel industry and seek to generate proactive interventions that will assist the downstream sectors in managing import threats.

“The sustainability and future existence of the steel sector as a whole – both upstream and downstream – is integral to achieving the country’s economic support and development goals; however, for South Africa to survive the relentless infiltration of international competition, it requires synchronised efforts from all involved domestically,” XA International said in a statement.

The workshop will be held at the Birchwood Hotel and Conference Centre, in Johannesburg.

Source : Engineering News

Applications for new R1.5bn steel incentive open on June 1

Economic Development Minister Ebrahim Patel released details on Thursday of a new R1.5-billion incentive for downstream steel manufacturers, which would be implemented from June 1.

The incentive, officially named the ‘Downstream Steel Industry Competitiveness Fund’ is to be administered by the Industrial Development Corporation (IDC), which will also provide the bulk of its funding.

In fact, the Economic Development Department (EDD) will inject only R95-million of direct on-budget funding, spread over a three-year period, with R30-million available for the current fiscal year.

However, Patel said the funding, while modest, would enable the IDC to offer discounts to its already favourable interest rates to qualifying beneficiaries. The IDC might also consider, on a case-by-case basis, including a grant element, should such funding be required to facilitate an investment.

The fund would target steel-intensive downstream manufacturers and would not be open to integrated steel mills, component manufacturers that qualify for other incentives, or large multinational original-equipment manufacturers receiving support under sector-specific schemes, such as the Automotive Production and Development Programme.

However, the fund would be open to applications from foundries and fabricators of pressure vessels, pipes and structural steel products. Parts and component manufacturers of steel-intensive products would also be eligible, along with valve and pump manufacturers, machining plants, and capital equipment producers, particularly in the rail and rolling stock subsector.

“The fund will mainly target very small, small and medium enterprises, as defined in the National Small Business Amendment Bill. However, large enterprises up to a maximum annual turnover of R450-million will be considered, depending on developmental returns.”

Should there be an oversubscription against the incentive, the EDD and IDC would prioritise support based on criteria such as job creation, transformation and black empowerment, and beneficiation.

The incentive is being introduced amid moves to further protect South Africa’s upstream steel sector, which has faced an existential crisis in recent years as a result of a rise in cheap imports, mostly from Asia.

Duties have already been increased on a range of primary steel products up to the 10% bound rate allowed for under South Africa’s World Trade Organisation commitments. Protection has also been instituted on some downstream steel products.

In addition, Trade and Industry Minister Dr Rob Davies recently signed off on a 12% safeguard duty on hot-rolled coil (HRC), which would be instituted in addition to the base tariff of 10% on HRC from July 1.

Patel acknowledged that downstream industries in the metals and engineering sectors were under “serious pressure”, which had resulted in firm closures and the loss of 25 000 jobs in the last year.

The fund was designed as a “timely intervention” to place the sector on sounder footing.

Source : Mining Weekly

Davies promises support for downstream firms as he confirms steel safeguard duty

Trade and Industry Minister Dr Rob Davies confirmed on Monday that he had signed off on a hot-rolled coil (HRC) safeguard duty, but refused to be drawn on the duty level proposed until the Word Trade Organisation (WTO) had been notified.

Speaking in Johannesburg at the release of the ninth Industrial Policy Action Plan (Ipap 2017), Davies reiterated the importance of sustaining a primary steel industry, which had come under intense pressure as a result of the current global oversupply of steel.

He also insisted that government was also taking active steps to support the domestic downstream steel sector, with some steel fabricators having expressed concern that additional protection against primary steel imports could undermine their competitiveness.

The safeguard duty had been proposed following an investigation by the International Trade Administration Commission of South Africa (Itac), which determined that there had indeed been an unexpected surge in imports of HRC into South Africa and that these cheap imports were causing injury to the domestic industry.

Once the WTO notification process had been followed, the safeguard duty would be imposed over-and-above the 10% tariff protection already in place for HRC and a range of other primary steel products.

South Africa previously had no import protection in place for primary steel products, but started to raise tariffs to the 10% bound rate allowed for under South Africa’s WTO commitments in 2015 and 2016.

The introduction of the 10% duties was justified on the basis of the distress being experienced in the primary steel sector, epitomised by the 2015 halting of steel production at Highveld Steel & Vanadium, the country’s second-largest steel producer.

The country’s largest steel producer ArcelorMittal South Africa (AMSA) lobbied intensively for both bound-rate and safeguard protection, making pricing, investment and employment commitments in return.

Last year, AMSA and government agreed on a new pricing mechanism for flat steel, based on a steel-price basket rather than import parity pricing. In addition government agreed to designate locally made steel products and components for public-sector construction projects.

Davies stressed that some protection had also been put in place for downstream products and announced that a new Steel Industry Competitiveness Fund would be established to support companies that added value to primary steel.

NEW INCENTIVES

Economic Development Minister Ebrahim Patel would release details of the new incentive, to be administered by the Industrial Development Corporation (IDC), in the coming weeks.

Davies emphasised that the scheme had budgetary support and was aligned to the Department of Trade and Industry’s decision to shift its resources from generic incentives programmes towards sector-specific initiatives.

Besides the steel incentive, government would also launch tailored incentives for agro processing and the foundry subsector.

Some generic incentives, including the flagship Manufacturing Competitiveness Enhancement Programme, would be sustained. But increasingly government industrial financing activities would be targeted in line with successes achieved in the automotive, clothing and textiles sectors.

The new incentives would be specifically selected for their propensity to create jobs, Davies said, highlighting the employment potential for both agro processing and foundries.

Ipap 2017 also outlines plans for an accelerated roll-out of government’s Black Industrialist Programme, which is backed both by R1-billion in grant funding and by a R20-billion IDC funding facility.

Davies reported that 40 entrepreneurs had already been selected for support under the programme and announced that the intention was to support 100 black industrialised by the March 31, 2018, two years ahead of the original target date.

He acknowledged that the criteria for support were stringent, but said that the intention was to elevate “hands on” industrialists “to the next level”. In other words, the programme was not designed to stimulate share transactions, but rather enhance the competitiveness of existing black-owned enterprises.

Davies also made a direct link between Ipap 2017, generally, and the Black Industrialist Programme, in particular, and the call for ‘Radical Economic Transformation’.

“We’ve got to promote more involvement of more South Africans, and particularly South Africans that were excluded in the past, in roles of ownership, leadership and participation in the productive economy,” Davies said. Such “inclusivity” should be pursued simultaneously with a reindustrialisation of the economy.

Manufacturing Circle executive Philippa Rodseth welcomed the new sector-specific investment incentives, noting that the organisation had worked closely with the DTI in planning the new agro processing incentive, in particular, to bridge the gap between policymakers and industry.

“This is a great opportunity for job-rich growth, and while we await further details on funding . . . we are optimistic that this new programme will make sense to both government and to industry.

Rodseth also signalled the organisation’s support for the proposed new incentive to support the downstream metals sector and again expressed a desire to offer input. “When tackling government on the fine print, we will seek similar principles to those discussed regarding the agro processing incentive – on the need to look at the whole value chain and linkages, on the need for economies of scale.”

Source : Engineering News