Two leading steel processing companies will make a submission to International Trade Administration Commission of South Africa (Itac) to voice their objection to ArcelorMittal South Africa’s (AMSA’s) application for tariff protection of 10% on hot-rolled coil (HRC).

HRC is the flat-steel product that is milled to a certain thickness by a primary steel producer and is processed further by re-rollers into a range of semi-finished steel products.

Both companies – Duferco Steel Processing (DSP) and Safal Steel – are foreign direct investors, employing over 700 South Africans directly and a further 1 200 indirectly.

DSP is a cold-rolling steel company based in Saldanha Bay, on South Africa’s West Coast, while Safal Steel is a fully integrated coated steel beneficiator based in Cato Ridge, KwaZulu-Natal.

AMSA confirmed recently that it had submitted applications for tariff protection on a broad range of steel products produced in South Africa, including HRC. In addition, CEO Paul O’Flaherty revealed that the JSE-listed group was preparing antidumping applications on several products, arguing that the 10% protection would be insufficient to stave off “unfair” Chinese imports.

To date, Itac has granted 10% protection on galvanised and colour-coated steel, and it was considering applications for reinforcing bar and wire rod, as well as plate, HRC, cold-rolled coil, tin plate, sections, bars and rods and semi-finished products such as slabs, blooms and billets.

O’Flaherty indicated that AMSA could apply for antidumping duties of between 30% and 40% for HRC and for between 50% and 60% on some wire products.

DSP GM Ludovico Sanges and Safal COO Raghu Ram warn that protection on HRC would have dire implications for the sustainability of their value-adding operations and for job retention.

In an interview with Engineering News Online they stressed that AMSA did not represent the entire steel industry and that downstream processors were also in distress as a result of rising processed-steel imports and weak domestic market conditions.

“HRC is the raw material for re-rollers and the duty application by AMSA will have negative and dangerous implications for these downstream companies,” Sanges said, noting that HRC accounted for 75% of a re-roller’s total cost of production.

Ram argued, too, that raising protection on HRC would further entrench AMSA’s monopoly position, as it would limit scope for price negotiation with a company that also produced value-added steel products and therefore competed with Safal and DSP in certain market segments.

It was also likely that the increased protection would lead to substantial increases in prices of downstream products, such as steel used for roofing.

He suggested that Itac needed to “differentiate” between re-rollers and merchants when considering HRC protection, as a failure to do so would undermine government’s beneficiation aspirations.

Ram emphasised that he not opposed to protection in principle, noting that Safal had backed the South African Coil Coaters Association’s application for protection on zinc coated galvanised steel sheets, aluminium zinc coated steel sheets and painted and plastic coated steel sheets.

However, they warned that the blanket application of protection on a primary input such as HRC would have serious unintended consequences.

DSP and Safal were also not alone in objecting to the protection being sought by AMSA, with a so-called ‘Steel Lobby’ having emerged recently to oppose the “unequal introduction of protective duties to protect primary steel producers”.

The Steel Lobby, which describes itself as the ‘voice for local downstream manufacturing’, is backed by National Employers’ Association of South Africa.