Trump tariffs to further hammer SA’s crippled steel and aluminium sector
Pleas that country also suffers from China dumping ignored
● A R3.4-billion loss is what South Africa’s steel and aluminium industry stands to incur after US President Donald Trump rejected the country’s bid to be exempted from steel and aluminium tariff hikes.
Moreover, an estimated 7 500 workers could lose their jobs in the steel industry.
Globally, Trump’s tariffs are seen as a move that could provoke a trade war with China.
The tariff hike on South Africa, which takes effect on June 1, is meant to protect the US market from the glut in steel supply in favour of its own industry.
This will put further strain on the steel industry in South Africa, which has been in a slump for the past few years. The boom days of the 2010 Soccer World Cup are a distant memory.
Steel demand has dropped significantly, in line with South Africa’s stalled infrastructure growth programme and economic growth slowdown.
Michael Ade, the chief economist at the Steel and Engineering Industries Federation of Southern Africa, said the US’s rejection of South Africa’s application for exemption was a travesty.
“The proclamation by the US will directly cost South African exporters roughly R3-billion worth of steel products and R474-million worth of aluminium products,” Ade said.
“This will not only starve the local industry of foreign currency, but it will also have a negative impact on the country’s foreign reserves.
“A further disruption on trade will include possible reductions in the quantity of steel and aluminium products exported to the US as local companies seek alternative export markets, thus negatively affecting exports competitiveness.”
The Department of Trade and Industry said that South Africa was “disappointed” that it had not been granted exemption from the duties of 25% on steel and 10% on aluminium products.
Trade and Industry Minister Rob Davies said South African officials had made several representations to authorities in the US over the tariffs and handed in two written submissions.
In its submissions, South Africa argued that it was also hard hit by the global glut of steel, especially the cheap imports from China, just like the US. China is the world’s largest steel producer.
The World Steel Association, in its latest report published for the short-range outlook, published last month, forecasts that global steel demand will reach 1.6 billion tons in 2018, an increase of 1.8% over 2017.
In 2019, it is forecast that global steel demand will grow by 0.7% to reach 1.62 billion tons.
The report also said the outlook for steel demand in the US remains robust on the back of strong economic fundamentals, specifically strong consumption and investment due to high confidence, rising income and low interest rates.
“The manufacturing sector is being supported by a low dollar and increasing investment while rising housing prices and steady non-residential sector growth point to a healthy construction sector,” it said.
In a research briefing released this week, Oxford Economics said it attached “a relatively low probability to a fully fledged trade war” between the US and China.
In March, when the proposed tariffs were first announced, car manufacturers in South Africa said they were unlikely to have any immediate impact on their operations.
This was because the new regulations targeted primarily raw steel products and not finished products.
Concern among local steel industry players remains high that the US could still use the steel tariff hike as a springboard for tariffs on finished steel products.
The US is a small but important market for South African steel makers.
According to figures from the South Africa Iron and Steel Institute, total domestic exports of primary steel products to all countries in 2017 came to 2.4 million tons, or about 35% of South Africa’s estimated primary steel output of six million tons.
The value of these exports was about R26-billion, of which the US accounts for only 10%.
The largest steel maker in the country, ArcelorMittal South Africa, with about 70% market share, dispatched only about 70 000 tons of primary steel products to the US last year, amounting to less than 2% of its total sales.
“ArcelorMittal South Africa’s primary markets remain South Africa and Africa overland,” it said.
This will also have a negative impact on the country’s foreign currency reserves Michael Ade Chief economist, Seifsa
A worker handles steel cable at a factory in Lianyungang, in China’s eastern Jiangsu province. The first salvos in the budding US-China trade conflict struck old-school sectors such as steel and agriculture.