Steel import tariffs destroying local manufacturing

Import tariffs for steel are destroying local manufacturing by making local manufacturers less competitive, while the local steel manufacturer, ArcelorMittal, charges global market prices although it is not affected by global shipping issues.

This, despite the fact that manufacturing is supposedly a national priority.

“Last year was dismal for manufacturers of steel products in South Africa, triggered by unprecedented shipping delays out of China. Most of our products depend on steel tubing manufactured locally from coils of flat steel sheet that we buy from local wholesalers,” says Greg Talbot, MD of Tal-Tec, a local manufacturer of modular farming solutions for managing livestock in Brits.

A number of manufacturers in South Africa manufacture steel tubing, including Barnes Tubing, Augusta and MACSTEEL. They all buy their coil from ArcelorMittal.

The global shipping crisis created shortages of coil to manufacture tubing, causing the global market to skyrocket.

Talbot says Tal-Tec’s input costs went up by 110% to over US$1500/t at one stage last year and the company still has to pay prices of over $1 200/t, which is about R22 000/t.

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Steel import tariffs and ArcelorMittal

“A number of years ago, ArcelorMittal negotiated to have 18% import tariffs and duties on imported steel, including coil, to protect its local business, yet it can still charge the global market price for locally produced steel although these prices should not be affected by global shipping issues,” he says.

This means that local manufacturers get the raw end of the deal despite the fact that local manufacturing is a national priority. Talbot says before these cost escalations, the local cost to produce a ton of steel tubing, using coil from ArcelorMittal, was running near $850/t.

“Since ArcelorMittal bought ISKOR, local ArcelorMittal steel plants have not been modernised in any significant way. Newer companies, specifically in the Eastern Block of Europe, can produce tubing far more efficiently at costs of around $550/t. Our input costs have therefore long been more than those from overseas competitors.”

Talbot says nuts and bolts are another input concern. “There used to be several good local manufacturers, but due to competitive pressure from China, these have nearly all closed down and those that are still open depend on ArcelorMittal steel and cannot compete with the Chinese. Again, anyone wishing to import nuts and bolts to reduce their costs is subject to the additional import tariffs.”

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Competing with Chinese steel products

He says local manufacturers are especially affected when they export into Africa.

“We then have to compete directly with Chinese finished products that do not have these protectionist duties. Going forward, this is likely to seriously affect the export market, because China is really pushing into Africa. By paying up to 25% duties, mostly to protect South Africa’s raw steel manufacturer, our products become 20% more expensive than imported finished gates sent to Zambia from China.”

Talbot says local manufacturers of white goods, such as washing machines with steel cages, are again at least 20% more expensive than imported washing machines. However, no tariffs are applied to machines directly imported from ‘favoured nations’ overseas, which directly disadvantages local manufacturing.

“Government must help local producers by applying tariffs to finished goods and not on raw steel imports and nuts and bolts. We desperately need a more modern, efficient and cost-competitive steel industry in this country if we are to have any hope of competing in the global market, but we also need tariff policies that favour local goods manufacturers, from small to large, instead of only protecting the overseas-owned interests of our local raw steel producer.”