The stainless steel sector is currently experiencing global trade uncertainty, owing to trade barriers being considered globally, as a result of the US duties on steel and aluminium, says Middelburg-based stainless steel producer Columbus Stainless CEO Lucien Matthews.
The US duties include a 25% import tariff on steel and 10% tariff on aluminium goods that came into effect on March 23.
“The trade restrictions imposed by the US are being countered in various countries with trade blocks. This process is not complete and is developing day by day, which subsequently leads to uncertainty for importers in various countries. As a result, trade protection has become a focus for countries in the past few years.”
With South Africa accounting for only 2% of stainless steel imports into the US, the duties imposed on South African-origin material appear to be out of context, states Matthews. However, he points out that US clients still prefer supply from Columbus Stainless, owing to the custom-designed products it supplies, for which clients are prepared to pay the additional duty.
Notwithstanding, Columbus Stainless, in combination with the International Trade Administration Commission of South Africa and the Department of Trade and Industry, had requested leniency for South African steel producers from the US duties, explains Matthews. The outcome was unfortunately unfavourable.
Columbus Stainless sales into the US market are about 4% of total sales and this volume can be directed to other international markets, he claims.
Matthews is concerned that other trade wars might follow – with other countries following the US actions or implementing duties on other goods – and the impact of these measures on other South African primary manufacturers. “Should this materialise, the results will affect all markets and the full impact will only be seen and assessed after its implementation.”
Meanwhile, in South Africa, there is growth potential in the downstream manufacturing industry, where primary stainless steel is converted into finished products, Matthews states. “The global downstream manufacturing industry still appears to be in a good position, while in South Africa, there are some signs of improvement.”
However, the current price of power and natural gas locally, combined with possible water shortages, have resulted in global players being hesitant to invest in the South African economy, most noticeably in mining. Mining is one of the main consumers of stainless steel in South Africa and the lack of new investment and maintenance requirements is impacting on local stainless steel primary producers, as well as finished goods producers. Unrest from the growing number of educated but unemployed youth is also disrupting the economy, further impacting on investor sentiment, Matthews concludes.