US exposes local steel producer to scrutiny
ArcelorMittal SA might have hoped that the recent weakness in the rand would have brought it some relief in terms of the volume of steel coming into the country and its own exports, but it’s not to be. Or at least it won’t be if the US is successful with its claims that SA is dumping steel products in the US market.
The import duties that the US steel industry is looking for would certainly smother any benefits that might flow from a weaker rand.
SA is not the only country being targeted by the US steel industry. It is merely one of 10. Among the others are Belarus, Italy, Russia, Spain and Turkey.
If you’re wondering why China is not on the list, it is because China has already been investigated and slapped with antidumping duty orders. As have Indonesia, Mexico and Brazil. The new petition, which was filed on Tuesday, means that all global steel producers have been targeted by US authorities for alleged dumping.
The petition alleges that South African producers — read ArcelorMittal — benefit from dumping margins of between 159.35% and 164.08%. These look pretty steep until you consider Russia’s alleged dumping margins, ranging between 216.5% and 821.4%.
Antidumping duties don’t inevitably flow from such a petition. The allegations will now be investigated, and affected companies will be given a chance to make representation.
But it might be uncomfortable for all concerned if it turned out that ArcelorMittal SA was using the tariff protection recently (and rightly) granted on SA imports to maintain profit margins, while it was selling product aggressively in the US. This would imply local steel consumers were subsidising US consumers, which is not the way it is supposed to happen.
The other point to ponder is why US President Donald Trump’s administration doesn’t hold off on import duties until it is finished building that elusive wall with Mexico.
If there is one thing the clothing retail market knows, it is that you’re only as good as your last season. On top of having your product lines correct, you need to be fast and adaptable. This is a hard lesson that local retailers are learning.
Truworths, Edgars, Woolworths and Mr Price have had it good for many years because there wasn’t that much competition. Also, South Africans were spending freely and credit was readily available.
But all that has come to a grinding halt. The economy has stumbled and has dragged consumers down with it. Middle class families, who drive consumption in SA — at 62%, have been the hardest hit. Additionally, international players have been streaming in, adding to the competition. They include Zara, Cotton On and H&M. These multinational companies have caught local players napping, and the numbers show it.
H&M is making a killing. Its sales rose 39% in rand terms. While this is from a low base, it is nothing to scoff at.
JSE-listed companies mostly reported a decline in like-forlike sales earlier in 2017, most notably Truworths.
H&M’s success is partly attributable to getting fashion on the shelves quickly, a skill that is largely lacking among the locals. The Swedish group pulls it off in mere weeks.
Investors must wonder how long the locals will allow foreign competition to eat their bread.