South Africa faces a clear choice. Does it want a thriving and competitive domestic world-class steel industry, or to become dependent on the vagaries of dominant international producers and imports?
Given the strategic importance and high multiplier effects of the primary steel industry, as well as the huge cost of establishing, renewing and replacing a domestic steel industry, there can be no ambiguity. The costs of losing steel manufacturing capacity are enormous and extend way beyond purely financial considerations.
For some local importers, the competitive price advantage they claim to gain from cheap subsidised imports should be seen for what it is, self-interested short-term commercial benefit.
That the South African primary steel industry (which consists of 15 primary steel producers and two rerollers) is facing severe challenges is indisputable. Chronically low economic growth rates, lack of infrastructure investment, pallid investor confidence, the energy crisis, rail and port failures and policy uncertainty have all pummelled domestic steel demand.
Moreover, there is no free trade “invisible hand” that balances out the global steel market fairly or evenly. Rather, there are steel producers that meet their domestic needs and export the surplus competitively. The surplus export propensity can be magnified either when local demand in respective countries is low or certain producers that enjoy state support and protection export vast amounts of surplus steel.
Increasingly, South Africa has been importing significant volumes of artificially cheap and surplus steel, which are subsidised by foreign governments in order to protect the sustainability of their own steel industry. Indeed, some of the steel is imported into South Africa at unsustainably low prices.
The World Trade Organisation anticipates the trade distortions and has a variety of trade remedies available to member countries. The WTO makes clear that a WTO member may restrict imports of a product temporarily (take “safeguard” actions) if its domestic industry is injured or threatened with injury caused by a surge in imports.
The surge in imports of steel into South Africa is clear and demonstrable. While South African steel consumption has declined by 23% over the past decade, imports have grown from 20 to 30% of apparent steel use, most specifically since 2022. This, while South African steel capacity is more than twice the apparent domestic steel production.
South Africa is far from alone in dealing with a surge in cheap steel imports. Countries across the globe have adopted up to 200 measures annually to deal with surges of cheap, and sometimes sub-standard, imports.
The EU for example, has recently extended safeguard measures on steel imports until 2026. The US has tripled tariffs on imported Chinese steel. Brazil, Indonesia, Mexico, Thailand and Canada have adopted similar measures while South Korea and Japan are reviewing their positions
But the crux of adopting safeguard measures against cheap imported steel is that it is in the public interest, rather than that of a handful of local commercial interests. Local steel is the backbone of our economy.
South African steel provides electricity, builds our cities, transports our people and provides the tools with which mine and farm. Local steel is integrated into our daily lives. It is the access to easily available, high quality locally produces steel that has driven South Africa forward as a nation.
To achieve our national developmental and economic objectives, South Africa must exercise industrial sovereignty. Not only does the local steel industry ensure industrial sovereignty, it is vital for fostering economic growth. The long and integrated local steel value chain ensures a stable supply of steel, reduces dependence on imports and contributes significantly to job creation and skills development. Downstream beneficiation is a key element to the industry, with thousands of companies dependent on participating in the local steel value chain.
In employment terms alone, the local steel industry is responsible for the creation of up to 500 000 direct, indirect and inferred jobs. This in a country with an unemployment rate in excess of 33%. The often-unseen benefits of the local steel industry are to be found in its research and development expenditure, its corporate social responsibility programmes that provide science and mathematics education to tens of thousands of learners, its Women of Steel programme for female advancement and the upliftment of communities in which it operates.
Despite the manifold threats, local steel manufacturers are ploughing billions of rand into plant, upgrades, greener steel production, environmental and renewable energy initiatives, all aimed at the sustainability of this vital national resource. It is a resource that is well worth sustaining in the national and public interest.
Kobus Verster is the CEO of ArcelorMittal South Africa.
BUSINESS REPORT