Steel producer ArcelorMittal South Africa (AMSA) dismissed suggestions again on Wednesday that its deal with government to raise steel import protection in return for fairer pricing – as well as jobs and investment guarantees – precluded it from increasing prices.
The JSE-listed company was responding to renewed criticism of the four price increases instituted since the start of 2016. The opposition Democratic Alliance suggested that the increases were evidence that Trade and Industry Minister Dr Rob Davies was allowing AMSA to renege on its pricing commitments.
Acting CEO Dean Subramanian said the increases could be attributed entirely to higher input costs and a rise in the international price of steel and had no relation to increased levels of protection.
AMSA had applied for, and received, protection across ten product categories, with 10% duties already applying on eight of those categories. In addition, it had applied to the International Trade Administration Commission of South Africa for safeguard duties on several products, including hot-rolled coil (HRC), which makes up a large portion of current imports.
Speaking at the release of the group 2016 Factor Report, which outlines the company’s positive and negative social, economic and environmental impacts, Subramanian said AMSA had never promised that it would entirely refrain from increasing prices. “All we said was that we won’t use duties as a mechanism to increase prices.”
He highlighted that the cost of iron-ore and scrap had risen in 2016, while the price of HRC out of China, which fell to $272/t in December, reached a peak of $465/t earlier in the year before moderating to around $350/t. The rand had also weakened relative to the dollar over the period.
“Our pricing philosophy [for flat steel] is based on the fair pricing basket that we have been discussing with government,” Subramanian outlined, adding that the group forfeited about $30/t during its most recent price hike in May in a bid to support downstream consumers.
Chairperson Mpho Makwana said the trade-offs agreed with government relating to pricing, jobs and investment could not be pursued in a way that resulted in the company trading “recklessly”.
He said the goal was to ensure a sustainable business and primary steel sector, which AMSA argued provided a net positive contribution to South Africa, with the Factor Report calculating that the company supported nearly 90 000 direct and indirect jobs. It also measures its direct and indirect economic contribution as being at R43-billion, or 1.1% of gross domestic product.
Makwana also highlighted the company’s contribution to beneficiation, stating that producing steel from domestic iron-ore and coal resulted in value addition of R24.3-billion.
“If this industry ceases to exist in this country, there will be disaster,” he warned, likening criticism of efforts to sustain the industry to those on the dry, elevated side of the sinking Titanic blaming those of the sinking portion for their side being wet.