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SA steel tariff hikes threaten jobs
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Proposed increases to 460 steel tariff codes are set to affect more than 16 000 traders and R51,5 billion (US$2,9 billion) worth of imports, sparking fears of job losses in South Africa's downstream steel industry.
Trade consultancy XA Global Trade Advisors warned this week that no more than 85 traders account for about half of the affected imports, meaning a small group of firms will shoulder the heaviest burden. More than 600 steel products could see tariffs rise to their World Trade Organisation (WTO) bound rates of between 10% and 30%, according to a preliminary notice from the International Trade Administration Commission (Itac).
Itac, which manages the country's tariff regime, argues that the increases are designed to shield local producers from cheap imports, mainly from Asia. Earlier this year, Itac launched the largest tariff review in its 22-year history following threats by ArcelorMittal South Africa (Amsa) to shut its Newcastle and Vereeniging mills due to the surge of low-cost imports.
However, the National Employers Association of South Africa (Neasa) criticised what it described as a "blanket approach", saying the tariffs would hurt fabricators who rely on quality raw steel not made locally or only available at higher costs.
"The problem with Itac's approach is that it doesn't distinguish between cheaper finished products flooding the market and affordable raw steel products that many local manufacturers need," Neasa said in a statement.
While Itac has proposed rebates for products not available in South Africa, Neasa argued that the conditions were vague and left too much power in the hands of the regulator, as import permits would be required for many products.
David MacKay, CEO of XA Global Trade Advisors, warned that the global steel glut, fuelled by China's overproduction, was unlikely to ease soon. He said Amsa, despite R2 billion in support and strong tariff protection, remained under pressure, while subsidised mini-mills using scrap metal added to oversupply.
MacKay cautioned that the proposed tariffs, coupled with possible export duties on iron ore and coal, could force miners to offer steep local discounts before obtaining export permits. This comes as the mining sector already grapples with Transnet's failing rail and port infrastructure.
The planned measures follow the existing preferential pricing system on scrap steel, which compels dealers to sell locally at a 30% discount to global prices.
Economists say the impact will be most severe for downstream industries, which employ 90% of the steel sector's workforce. About 77% of the new tariffs will target intermediate goods, 14% capital goods, and just 9% finished products.
The biggest changes will hit Chapter 73 tariff codes covering tubes and pipes, while Chapter 82 items such as tools and implements — previously duty-free — could now face tariffs of up to 20%.
The increases are expected to generate as much as R6 billion in new duties, but critics warn they will also drive up prices, reduce consumption, and place thousands of jobs at risk in steel fabrication and manufacturing.
Trade consultancy XA Global Trade Advisors warned this week that no more than 85 traders account for about half of the affected imports, meaning a small group of firms will shoulder the heaviest burden. More than 600 steel products could see tariffs rise to their World Trade Organisation (WTO) bound rates of between 10% and 30%, according to a preliminary notice from the International Trade Administration Commission (Itac).
Itac, which manages the country's tariff regime, argues that the increases are designed to shield local producers from cheap imports, mainly from Asia. Earlier this year, Itac launched the largest tariff review in its 22-year history following threats by ArcelorMittal South Africa (Amsa) to shut its Newcastle and Vereeniging mills due to the surge of low-cost imports.
However, the National Employers Association of South Africa (Neasa) criticised what it described as a "blanket approach", saying the tariffs would hurt fabricators who rely on quality raw steel not made locally or only available at higher costs.
"The problem with Itac's approach is that it doesn't distinguish between cheaper finished products flooding the market and affordable raw steel products that many local manufacturers need," Neasa said in a statement.
While Itac has proposed rebates for products not available in South Africa, Neasa argued that the conditions were vague and left too much power in the hands of the regulator, as import permits would be required for many products.
MacKay cautioned that the proposed tariffs, coupled with possible export duties on iron ore and coal, could force miners to offer steep local discounts before obtaining export permits. This comes as the mining sector already grapples with Transnet's failing rail and port infrastructure.
The planned measures follow the existing preferential pricing system on scrap steel, which compels dealers to sell locally at a 30% discount to global prices.
Economists say the impact will be most severe for downstream industries, which employ 90% of the steel sector's workforce. About 77% of the new tariffs will target intermediate goods, 14% capital goods, and just 9% finished products.
The biggest changes will hit Chapter 73 tariff codes covering tubes and pipes, while Chapter 82 items such as tools and implements — previously duty-free — could now face tariffs of up to 20%.
The increases are expected to generate as much as R6 billion in new duties, but critics warn they will also drive up prices, reduce consumption, and place thousands of jobs at risk in steel fabrication and manufacturing.
Source - moneyweb
