Duferco Steel Processing (Duferco) is calling on the Department of Trade, Industry and Competition (DTIC) to adopt a more far-sighted and impartial approach that will benefit the South African steel industry as a whole. Ludovico Sanges, CEO of DSP, says DTIC’s approach to protecting the local flat steel industry unfairly benefits only certain sectors of a complex ecosystem.
“You could call this approach short-sighted because it clearly doesn’t work and is in fact strangling the massive rerolling industry on which thousands of small manufacturers depend. The data shows that far from boosting local steel production, the uneven application of tariffs simply suppresses competition and shifts manufacturing overseas,” he explains. “The DSP is behind the concept of a steel master plan, but it must support the entire steel industry, not just parts of it, by creating fair competition that will serve the entire industry, including the important downstream sector.”
In 2016, the DTIC implemented a 10% tariff on imported hot-rolled coils with the stated aim of protecting the only local producer of the product, AMSA. DSP uses hot rolled coils to create galvanized steel and cold rolled steel, which is widely used in the manufacturing and construction industries.
Inside the Duferco Steel Processing plant
In fact, says Mr. Sanges, the opposite has happened. The 10% tariff 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 around 40 jobs. It now manufactures only for the international market – imports for the latter are exempt from the protective tariff.
“DSP aside, we have to ask ourselves if the 10% hot rolled coil tariff is working for South Africa Inc, and with three years of data we have a factual basis to answer the question with a ‘no. “categorical,” Mr. Sanges said. said. “In 2020-21, our manufacturing of uncoated cold-rolled coil for the domestic market decreased by 31,400 tons, with a corresponding increase in imports of 39,300 tons. Likewise, our domestic sales of coatings decreased by 83,200 tonnes with a corresponding increase in imports of 163,500 tonnes.
“In other words, we have lost a lot of local manufacturing capacity to not local industry but to our international competitors. In effect, all this tariff has done is eliminate a major competitor from the local market, putting the downstream industry at the mercy of the sole remaining producer. This did not lead to an increase in hot rolled coil production locally, it just made it more profitable for AMSA.
The steel products produced locally by DSP, from imported hot rolled coils, are competitive in the international market. The tariff thus effectively eliminates a globally competitive, high-quality coated and uncoated steel producer in the local market.
Similarly, long steel producers have recently benefited from additional protection via an export duty on scrap exports. Long products already benefit from Government Regulated Scrap Prices (PPS) and after investigation into the effectiveness of the PPS by DTIC, it was decided that further support was needed to keep them profitable and competitive.
“DTIC has shown that it is ready to support producers of long steel products, so why does it continue to refuse support to the re-rolling industry? It just doesn’t make sense, and the data clearly shows that it’s having a massive negative effect on the country’s industrial capacity, just at a time when we’re supposed to be gearing up for a major infrastructure push,” says- he.
“We have applied for a protective tariff rebate on hot rolled coils in 2020 and have yet to hear back. Without the support of DTIC, rerollers will continue to struggle against fierce headwinds, significantly weakening the steel blueprint.