Tariff lifeline for ArcelorMittal means higher prices for customers

The Citizen

08-05-2025

'Safeguard' duties of 13% were imposed at the start of May to shield Amsa's hot-rolled steel products from international competition.
Itac and the IDC both fall under the dtic. In setting steel tariffs, Itac is accused of cossetting its own portfolio. Picture: Supplied
The International Trade Administration Commission of SA (Itac) has announced temporary 'safeguard' duties on some hot-rolled steel products produced by ArcelorMittal SA (Amsa).
The 13% safeguard duties kicked off on 2 May for a year, reducing to 11% and 9% over the subsequent two years, and then to zero.
The safeguard duty is on top of the 10% customs duty already in place, bringing the import protection to 23% in the first year. The total duties on hot-rolled products fall to 21% from May 2026 and 19% from May 2027.
The safeguard duties were gazetted last week and are seen as a lifeline for embattled steel producer Amsa, which has been undercut by low-cost imports from China.
'There's nothing worse than a temporary tariff,' comments Neels van Niekerk, executive chair of International Steel Fabricators.
Hot-rolled steel is used in construction, manufacturing, and engineering and is a key input in mining equipment, water tanks, gas cylinders, and truck trailers.
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'Necessary, not punitive' – Itac
'Safeguard measures are designed to address unforeseen surges in imports that threaten or cause serious injury to a domestic industry,' says Itac. 'While these measures are not punitive, they are necessary to ensure fair trade conditions and protect local industries from being overwhelmed by excessive foreign competition.'
Imports now account for about a third of local steel consumption, with Amsa's net realised prices falling to levels last seen in 2015.
This, and Amsa's galloping transport and electricity bill – up 14% to R3.2 billion in 2024 – contributed to its decision to wind down its long steel mills in Newcastle and Vereeniging.
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Perspective
'Effectively, what this means is that customers can expect to pay 13% more for hot-rolled steel products,' says Gerhard Papenfus, CEO of the National Employers Association of SA (Neasa).
'Amsa asked for additional protection and they got it. What South Africa needs right now is steel of the best possible quality, wherever we can get it.
'If we have to import, then so be it. We cannot continue to support industries that cannot compete without more and more protection.'
The Industrial Development Corporation (IDC) provided R1 billion in short-term lending to Amsa, alongside another R380 million loan and an additional R1.68 billion shareholders loan in the hopes of extending the life of its longs business.
However, that may not be enough to rescue Amsa.
'For Amsa Newcastle to survive, it will require a lot more than money,' says Donald MacKay, CEO of XA Global Trade Advisors.
'If the problems they identified are not addressed, they will burn through the money from the IDC and we will be back here [for more money].'
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Market distortion
The steel market is further distorted by the IDC's R14 billion exposure to mini-mills, which use scrap metal as feedstock and compete with Amsa in certain products.
These mills enjoy a substantial pricing advantage through the Preferential Pricing System (PPS), which allows them to secure scrap at 30-50% discounts to market prices.
This means scrap can only be exported after being offered to local mills at a 30% discount.
This is in effect a ban on scrap exports and a R8.5 billion annual subsidy to mini mills – resulting in an estimated 50 000 scrap collectors in SA being forced out of business.
Scrap dealers tell Moneyweb that removing the PPS would allow the 300 000 scrap collectors in SA to earn a decent living rather than transferring this benefit to the mills.
This benefit comes on top of a 20% export duty on scrap.
Mark Fine, head of the Scrap Recycling Coalition, an informal grouping of 48 scrap metal dealers, says these mills produce billets, which are little more than scrap 2.0 and a way to circumvent export restrictions on scrap.
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Mini-mills say even with the PPS in place, there remains a shortage of scrap in SA, though Fine says this is disproven by the fact that these mills exported more than 400 000 tons of recycled scrap in billet form in the first few months of 2025.
Itac's steel tariff policy has been criticised as self-serving, given the IDC's massive exposure to these mini-mills, some of which are in business rescue.
Itac and the IDC both fall under the Department of Trade, Industry and Competition (dtic). In setting steel tariffs, Itac is accused of cossetting its own portfolio.
'If government demand increases, it will be met by product from the mini mills, because the subsidies give them an ability to keep their prices low. Amsa on the other hand, has to pay back the IDC loan, which will be burnt through even quicker this time, given the steep discount they are providing on long products to simply stay in the game.
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PPS 'a massive scam'
Fine says the PPS is a legacy of former trade and industry minister Ebrahim Patel and has been fatal for the industry.
'These mini-mills are mostly foreign-owned and they add very little value in the steel chain. Yet they receive this massive transfer of wealth each year, claiming that without the PPS South Africa would face a shortage of scrap.
'That's an absolute lie. These mini mills produce what I call scrap 2.0 which they can then export and make nice profits for themselves because the export restrictions don't apply. This is a massive scam.'
Nampak is reckoned to be losing R115 million a year due to its inability to earn fair market value on its ferrous scrap.
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And Transnet – the country's largest generator of scrap – is reckoned to lose R40-R50 million a month due to the PPS.
That does not count scrap from automotive producers such as VW and Toyota.
Tami Didiza, manager for stakeholder management and communications at Amsa, says a number of these companies have been unable to operate successfully and could have closed had the current dtic policies of scrap intervention through the PPS, Scrap Export Tax and an export ban (which lapsed in 2023) not saved them over the last five years.
'The government intervention to allow a deferral of the wind down of the Amsa longs business provides an opportunity for the fundamental structural issues facing the steel industry to be addressed, and to place it on a sustainable path by removing the market distortions that have been created,' says Didiza.
This article was republished from Moneyweb. Read the original here.