Donald Mackay | March 23, 2025
Government policies are attempts to change market behavior (are too many imports? Let's impose import obligations). When the government decided in 2012 to move money from packaging companies, automakers, steel manufacturers (scrap metal to steel companies), through the pricing system (PPS), through the subsequent financial and export operations of friendly industrial development companies, they made steel cheaper from mini mills compared to both imports from South Africa (AMSA).
That's what economists call trade-offs, and every policy decision has one, whether taken intentionally or not. Policy essentially shifts resources from one part of the economy (manufacturer, scrap recycling, waste pickers, AMSA) to another part of the economy (mini mill). This was the intention, but it appears to assume that shifting these resources will come for free. It's wrong.
At the end of November 2023, AMSA announced it was considering closing its Longs business in Newcastle, identifying its scrap metal policy as one of the reasons for the closure. Many meetings were held between the AMSA and the government for about a year. There was a panic, but the steel policy remained intact. Damping I saw some action on the front of the anti-dumping and protection, but most were MEH.
January 2025 was swayed, and AMSA once again announced its long shutdown of its steel business, but this time it won't get too intense. To keep the business open after January 31st, the government has baffled R380 million. With care, we still have the same policy, but AMSA is paid to stay open longer while it's happening behind the scenes. AMSA wants billions more.
And boom! On March 19, 2025, the International Trade Bureau Commission (ITAC) published its largest tariff and other amount reviews in its 22-year history, all focusing on steel. In this review, over four chapters, 609 customs codes cover Chapters 72 (why stainless steel in major steel and stainless steel?), 73 (steels such as pipes and wires), 82 (tools and cutlery), and 83 (extraordinary steel items like padlocks). This is an import worth R67 billion. Of these tariff codes, 355, are being considered for increased obligations, and if all are approved, add R17.6 billion to the tariff bill.
Three rebates (duty exemptions) could be removed, and if you went to the 24 importers who use these rebates, you would sacrifice R87 million jobs per year. Import licenses are considered in 61% of all steel imports. In other words, it's not just customs duties anymore. You may face a simple refusal to be allowed to import.
That doesn't end there. With no details provided, scrap metal (again), iron ore and caulking coal are reviewed to see how costs can be reduced to local consumers. In other words, ITAC may be trying to expand PPS to iron ore and coal. In 2024, we exported R104bn bit bit coal and R109bn iron ore.
Imagine the impact of enforcing these mines that are already tense from our railways and ports and offering minerals at discounts locally before being allowed to obtain export licenses. ITAC is naturally complaining about the difficulties of doing this with scrap metal. Imagine this being 20 times (at least) larger than scrap metal.
Ah, the possibility of protection and enforcement standards for “high-risk steel products.”
There will be four weeks (April 16th) to comment on stakeholders. Yes, seriously.
The promise is that the tariff investigation will be completed in six months, but will take an average of 27 months, covering only a small number of customs codes for each. If you are undergoing all other open tariff investigations, some of them have been open for more than 50 months, but they are only a small portion of the scope of this investigation. ITAC must provide first feedback to the Minister by the end of June 2025.
There are nine other open tariff surveys covering these four chapters, as well as three anti-dumping and two safeguard surveys. Ah wait! The damping prevention investigation just began on March 20th, 2023About galvanized steel from China.
The magnitude of the trade-offs made in this study is incredible. My concern is that all of this is not as broad as it is happening in a single review. It's like everything that hasn't been done in the steel sector in a decade is happening this month.
ITAC has not yet published the results of a PPS review on scrap metal that was completed several months ago. Given that this policy has had a major impact on AMSA and will include scrap in this review, it is very important to publish the results of that review before considering any other ways to lower the price of scrap steel.
The resulting decisions made under pressure pose an unbalanced risk, even by the greatest mind. The downstream sector, which employs 90% of people in the steel value chain, is at existential risk. But so does AMSA, and so does Mini Mill. You can't please everyone. I hope policymakers are carefully counting the costs of decisions they are trying to tackle the steel sector. There are losers. Otherwise, don't pretend.
No matter what is decided, the steel industry will not look the same.
“Disclaimer – the views and opinions expressed in this article are the views of the author and are not necessarily those of the Bee Room.”
