Latest news with #GerhardPapenfus
Daily Maverick
07-07-2025
- Business
- Daily Maverick
The SA metal industry faces existential crises across several fronts
The domestic steel dispute takes a new turn as the Government Gazette reveals punitive 52% duties that could reshape South Africa's industrial landscape. Oh, and we're running out of scrap metal. Gerhard Papenfus, the CEO of the National Employers' Association of South Africa (Neasa), has perfected the sweet science of switching styles between lobbying Washington officials about farm murders and Black Economic Empowerment policies, and throwing legal power punches at government trade bureaucrats over what he calls an assault on the steel industry. It's a shifting stance that perfectly captures the contradictions of South Africa's current economic moment: lobbying foreign governments for business-friendly policies while simultaneously battling your own government's trade interventions at home. Papenfus recently returned from the US, saying that the stateside officials believe the South African government is 'not listening' and 'playing games'. It's a diplomatic dance that speaks to the growing international wariness about South Africa's economic trajectory. Taking on Itac In April, Neasa opened its fight against the International Trade Administration Commission of South Africa (Itac), threatening urgent legal action if the trade body proceeded with what Papenfus calls 'the largest tariff, duty, and import measures review in Itac's 22-year history'. In his opening volley, Papenfus called out the 609 tariff codes across more than four chapters, covering everything from primary steel and stainless steel to steel pipes, wire, tools, cutlery and even padlocks. 'No meaningful representations can be made by any affected stakeholder,' Papenfus argued, highlighting the review's vagueness. 'No informed, substantive or tangible technical representations could be made without more information regarding the precise interventions planned, as no percentages, quota numbers, permit requirements, surveillance rules and regulations, standards specifications or rebate details are provided.' Not entirely missing the mark Okay, he had a point; Itac typically takes 27 months per singular review covering only a small number of tariff codes, with some reviews dragging on for more than 50 months. Yet the Minister of Trade, Industry and Competition has set what he (Papenfus) rightly calls an 'impossible turnaround timeframe' of June 2025 for this mammoth undertaking. 'How it plans on performing this earth-shattering number of reviews' is the question that has Neasa and industry players scratching their heads. While Itac's review process unfolds, the government has already shown its hand with provisional safeguard duties that landed in a recent Government Gazette. The 52% counterpunch The numbers are crazy: a 52.34% provisional payment on specific flat-rolled steel products, imposed until 13 January 2026. The targeted products include aluminium-zinc alloy coated steel of various thicknesses, with an extensive list of countries excluded from the duties. Notably absent from the exemption list are major steel-producing nations such as China, though the Gazette's exclusions cover everyone from Albania to Zimbabwe. This isn't just trade policy; it's industrial warfare. The 52% duty in effect prices out imports, creating a deep moat around domestic steel production. But protection comes at a cost, and that cost is ultimately borne by downstream industries and consumers. Scrap metal headache Adding another layer of complexity is a growing dependence on ferrous scrap metal for green steel production. Government implemented the Price Preference System in September 2013 and an export tax in August 2021 to preserve this finite resource for domestic use. Amit Saini, a director at electric steel-producing mini mill Coega Steels, sketches the scenario: South Africa 'cannot afford to toy with the existing policies that are already 'only just' managing to preserve scrap stocks'. Why? Because the secondary steel manufacturing sector has an installed production capacity of 2.5 million to 2.8 million tonnes annually, requiring 2.7 million to 3 million tonnes of ferrous scrap. With new electrified mini mills coming online in Nigel and Durban, demand is projected to soar to 4 million tonnes by 2026. Saini warns that 'tinkering with the current regulations would put thousands of jobs at risk', a statement recognising that the country's 13 facilities currently employ more than 5,000 workers. The fix is radical: 'an outright ban on the export of ferrous scrap'. What this means for you Steel will cost more: The 52% duties mean higher prices for imported steel – and those costs will trickle down to products such as cars, appliances, construction materials and even cutlery. Local industries could feel squeezed: While steelmakers might celebrate, downstream manufacturers (which need affordable steel) could face higher input costs and job pressures. Scrap metal stays home: Expect tighter scrap metal controls to keep supply for local 'green steel' production. That's good for the environment, but risky for scrap exporters. Jobs on the line: Thousands of jobs depend on a delicate balance. Changes to scrap export rules or runaway steel costs could push some factories to the brink. SA looks more protectionist: Heavy tariffs and export bans signal a more closed-off trade stance, which could affect foreign investment and global competitiveness. Staying on trend The global context supports this approach. The European Union will ban ferrous scrap exports by 27 countries from May 2027, and the GMK Centre predicts that 'scrap prices will be regulated through trade restrictions' in local markets as worldwide sea-borne trade volumes decrease. What emerges from this industrial policy maze is a picture of a government struggling to balance competing priorities. Protect domestic steel production through punitive tariffs, preserve scrap metal for green steel initiatives and somehow maintain competitiveness in global markets. Papenfus frames Itac's review as 'a concerted effort to search every nook and cranny of the steel industry framework to find possible ways of suffocating it through regulatory red tape and additional charges'. It's a view that reflects broader business frustrations with government intervention. Yet the alternative – allowing cheap imports to flood the market while critical scrap metal resources are exported – carries its own risks. As Saini warns, 'deindustrialisation is a real possibility' if current policies are abandoned. In the trenches The steel wars represent more than industry disputes; they're a microcosm of South Africa's broader economic challenges. For now, Papenfus and his industry allies are preparing for a legal battle, armed with complaints about process, timelines and the sheer scale of Itac's ambitions. Whether they can halt the regulatory juggernaut remains to be seen. It's a fight with no easy victory, only costly compromises and the constant threat of unintended consequences. The 52% duties may protect domestic producers today, but they also signal a country increasingly willing to wall itself off from global markets. DM
The Citizen
08-05-2025
- Business
- The Citizen
Tariff lifeline for ArcelorMittal means higher prices for customers
'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. ALSO READ: IDC saves ArcelorMittal days before furnaces switched off '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. ALSO READ: Government still talking to ArcelorMittal while Seifsa identifies challenges 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].' ALSO READ: Concern about SA steel industry: Trump's tariffs and ArcelorMittal closure looming 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. ALSO READ: Did government policy kill SA's steel industry? 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. ALSO READ: Steel producers slam ArcelorMittal's call to end scrap export tax 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. ALSO READ: Cheap IDC funding 'placing the complete steel market at risk' 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.
