Duferco calls for DTIC to rethink its approach to the country’s steel industry

19th April 2022

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

Font size: - +

Producer of cold-rolled and galvanised coils Duferco Steel Processing (DSP) is calling for the Department of Trade, Industry and Competition (DTIC) to adopt a more far-sighted and even-handed approach that will benefit the South African steel industry as a whole.

DSP CEO Ludovico Sanges says the DTIC’s approach to protecting the local flat steel industry unfairly benefits only certain sectors of a complex ecosystem.

“One could call this approach myopic because it clearly is not working and is actually strangling the important re-rerolling industry on which thousands of small-scale manufacturers depend. The data shows that far from stimulating local steel production, the uneven application of tariffs is simply removing competition and transferring manufacturing overseas,” he argues.

“DSP is behind the concept of a Steel Master Plan, but it must support the entire steel industry, not just parts of it – creating fair competition will serve the whole industry, including the substantial downstream sector,” he adds.

In 2016, the DTIC implemented a 10% tariff on imported hot-rolled coil with the stated aim of protecting the only local producer of the product – ArcelorMittal South Africa (AMSA).

DSP beneficiates hot-rolled coil to create galvanised steel and cold rolled steel, which is extensively used in the manufacturing and construction industries.

However, Sanges says the 10% tariff has made it impossible for DSP to compete in the local market, and it exited the local market at the end of 2020 at the cost of 40-odd jobs. It manufactures now solely for the international market – imports for the latter are exempt from the protective tariff.

“DSP aside, we have to ask whether the 10% tariff on hot-rolled coil is working for South Africa Inc, and with three years of data we have a factual base to answer the question with an emphatic ‘no’.

“During 2020 to 2021, our manufacture of uncoated cold-rolled coil for the domestic market reduced by 31 400 t, with a corresponding increase in imports of 39 300 t. Similarly, our coated domestic sales reduced by 83 200 t with a corresponding increase of imports of 163 500 t," Sanges says.

“In other words, we lost a large amount of local manufacturing capacity to the benefit not of the local industry but our international competitors. Really, all this tariff has done is take a big competitor out of the local market, putting the downstream industry at the mercy of the remaining single producer. It has not resulted in increased production of hot rolled coil locally, simply made it more profitable for AMSA,” he notes.

Sanges mentions that DSP’s locally produced steel products, using imported hot-rolled coil, compete successfully on the international market.

The tariff thus effectively eliminates a high-quality, globally competitive producer of coated and uncoated steel to the local market, he adds.

Sanges says that, similarly, the producers of long steel have recently received additional protection via an export duty on exports of scrap metal.

Long products already enjoy the benefit of government regulated scrap prices (PPS) and after investigation into the effectiveness of the PPS by the DTIC, it was decided that additional support was required to keep them profitable and competitive.

“The DTIC has shown that it is willing to support the producers of long steel products, so why does it continue to withhold support for the re-rolling industry? It just does not make sense and the data clearly shows that it is having a massive adverse effect on the country’s industrial capacity, just at a time when we are supposed to be gearing up for a major infrastructure push,” Sanges says.

“We made an application for a rebate on the protective tariff on hot-rolled coil in 2020 and still have had no reply. Without support from the DTIC, re-rollers will continue to battle fierce headwinds, weakening the Steel Master Plan immeasurably,” he adds.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

Comments

The functionality you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION