The Steel and Engineering Industries Federation of Southern Africa (Seifsa) warns that the difficulties facing the local steel industry will continue to worsen in the year ahead if the US Department of Commerce's recommendation for a tariff of at least 53% on all steel imports from 12 countries - including South Africa - is accepted.
Describing this as "extremely concerning", Seifsa chief economist Dr Michael Ade added that the US Department of Commerce had 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 antidumping or countervailing duty collections applicable to any steel products from those countries.
All other countries would be limited to 100% of their 2017 import level.
According to the global trade analysis project model, produced by Purdue University, in the US, a 53% tariff on all steel imports from these countries would be expected to reduce imports by 13.3-million metric tonnes from 2017 import levels from the targeted countries.
This action would enable an increase in domestic production in the US to achieve an 80% capacity use rate at 2017 demand levels, including exports.
The countries identified are projected to account for less than 4% of US steel imports in 2017.
In January, the US Department of Commerce announced an affirmative final determination in the antidumping 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 US Department of Commerce and the US 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 the UK.
For the South African investigations, the US Department of Commerce assigned a dumping rate of 142.26% for the entity composed of ArcelorMittal South Africa Limited, Scaw South Africa and Consolidated Wire Industries, based on adverse facts available owing 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 February 22.
"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," said Ade.
Seifsa raised its concerns last year about the initial investigations and commented that it was just the tip of the iceberg, with the possibility of antidumping duties being extended to other domestic steel products. The federation also highlighted the potential for retaliation from many overseas trading partners to protect their steel industries.
Ade added that, although the initial indications were for possible tariff imposition on selected steel products from South Africa, it now appeared that the US Department of Commerce was advocating for the imposition of a blanket tariff on all South African 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 US, squeezing margins and depriving the steel industry of much-needed foreign reserves.
"Imports of carbon and alloy steel wire rod by the US from South Africa are valued at an estimated $7.1-million," Ade pointed out.
He said this situation was further compounded by a low domestic growth scenario which did not augur well for local steel production.
He noted that for growth in apparent steel consumption to be sustainable, gross domestic product has to grow by at least 5% - and the South African economy has not grown at those levels since 2007.
Ade said the significant 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 automotive manufacturing to household appliances and construction.