Steel producer ArcelorMittal South Africa (AMSA) has confirmed yet another round of price increases on both flat- and long-steel products, announcing average increases of 10% from May 1 and reinforcing what has become an established pricing trend since the start of 2016.

However, acting CEO Dean Subramanian has again insisted that the latest increases have nothing to do with recent moves to raise import barriers and are, instead, the result of a recovery in international prices from depressed 2015 levels.

Prices, AMSA notes, plunged by 38% between January and December 2015, as a consequence of falling demand and overcapacity, particularly in China. The resulting steel glut, made many steelmakers unprofitable and others unviable, with South Africa’s second-largest producer, Highveld Steel & Vanadium, entering business rescue in early 2015. The company has since ceased operations and retrenched workers after a bid to sell the operation as a going concern failed in January.

AMSA has itself pursued a far-reaching cost-reduction and restructuring programme, with its Vereeniging Works having been curtailed. It has also warned that the sustainability of its Saldanha Works is at risk, owing to fast-rising electricity prices. Scaw Metals, meanwhile, has also downsized operations and cuts jobs.

AMSA has also led the campaign to increase import protection, from 0% previously to the 10% bound rate allowed for under South Africa’s World Trade Organisation commitments. It has succeeded in securing such protection on eight long- and flat-steel products and the International Trade Administration Commission of South Africa (Itac) has deterimined to also increase protection on hot-rolled coil (HRC), other bars and rods.

Economic Development Minister Ebrahim Patel announced late last month that Itac had recommended the imposition of a tariff duty of 10% on HRC and certain steel bars and rods and that the recommendation was being processed within government.

Similar protection was granted on galvanised and colour-coated steel in December and, in February, Itac gazetted notice of a 10% protection on bar and wire rod, as well as plate, cold-rolled coil, sections, and semifinished products such as slabs, blooms and billets.

However, AMSA is particularly keen to secure protection on HRC, noting that the bulk of the 103 000 t of steel imports in February have been in the form of HRC.

The company is, separately, pursuing five safeguard-duty applications, which, if successful, would impose far higher protection levels over and above the 10% duties already secured. Itac is expected to make a determination on these applications in June.

Patel said the steel industry had been through a particularly difficult time, owing to the large surplus of steel globally.

“This has resulted in fierce price cutting and pressure on steel plants to close. In South Africa, we felt the effect of these global storms through a surge of imports. We consulted both primary steelmakers and their customers to determine the best way forward,” he said.

However, he stressed that protection had been introduced with the caveate: “in order to stop this facility from being abused”

Itac, he said, would be putting measures in place to track prices in the industry and would review the tariffs annually.

“The clear understanding between the main steelmaker and government is that they will invest at least R4.6-billion to improve their plant competitiveness, will not close any steel plants and will not cut jobs beyond what had previously been announced.”

Separately, AMSA has already announced a series of price increases on both flat- and long-steel products since the start of the year, with average prices rising by 10% again from May 1.

However, the company insisted that the increases had nothing to do with recent moves to raise import barriers and were, instead, the result of a recovery in international prices and a rise in raw material input costs.

International steel prices, he adds, increased by 20% over the past month and the May increase seeks to “moderate” the increase of domestic steel consumers.

“Over the last month, the price of traded steel sourced from China increased by more than 20% ($80/t) on HRC and 30% ($90/t) on reinforcing bar (rebar).”

However, the increases in the long-steel sector have also come with an indication from AMSA that it has been forced to implement a strict allocation of rebar and wire-rod customers, owing to shortages of such products in the domestic market. The group expects the backlog to persist until June for rebar and until mid-July for wire rod.

In a note to customers, AMSA said the base prices for flat- and long-steel products were set to rise as follows from May 1:

• HRC, cold-rolled and galvanised coil were to increase by R750/t.
• Plate (including quench and tempered) were to rise by R900/t.
• Flange and profile plate were to rise by R1 150/t.
• Colour coated coil was to increase by R200/t.
• Rebar (including smooth and mining bar) was to rise by R750/t.
• Wire rod, mesh bar, bolt and nut, grinding media, rounds, rails, medium and light sections (including windows and fencing) were to increase by R600/t.

“We reiterate that these price increases are not related to the recently implemented import duties, but based purely on international steel and raw material price movements. This is further highlighted by the fact that, although international steel prices increased by 20%, we have taken all stakeholders into consideration and opted for a more moderate 10% average increase,” Subramanian concludes.