When government, in 2012, decided to move money from packaging companies, car makers, and steel fabricators to the mini-mills (companies making steel out of scrap metal), by way of the Price Preference System (PPS), and then later friendly Industrial Development Corporation finance and export duties, they made the steel from mini-mills cheaper relative to both imports and steel from ArcelorMittal South Africa (Amsa).
That is what economists call a trade-off and every policy decision has one, whether taken deliberately or not. Policies, by their nature, shift resources from one part of the economy (manufacturers, scrap recyclers, waste pickers, Amsa) to another part of the economy (mini-mills). This was the intention, but the assumption seems to be that shifting those resources would come at no cost. Wrong.
At the end of November 2023, Amsa announced that they were looking at closing their longs business in Newcastle, identifying the scrap metal policies as one of the reasons for the closure. Lots of meetings happened between Amsa and government for about a year.
There was panic but the steel policies remained as they were. We saw some action on the anti-dumping and safeguard front, but mostly meh.
January 2025 swings around and Amsa again announced the closures of their long steel business but this time doesn't flinch. To keep that business open beyond January 31, the government stumped up R380 million. Bear in mind, we still have the same policies, but Amsa have been paid to stay open for longer while the haggling goes on behind the scenes. Amsa would like a few billion more. And then Boom! On March 19, 2025, the International Trade Administration Commission (Itac) published the biggest tariff-and-other-stuff review in their 22-year history, and it's all focused on steel.
This review considers 609 tariff codes, over four chapters, covering everything from chapter 72 (primary steel and stainless steel - why stainless steel?), 73 (articles of steel, like pipes and wire), 82 (tools and cutlery), and 83 (miscellaneous steel articles, like padlocks).
This is R67 billion worth of imports. 355 of those tariff codes are being considered for a duty increase, adding R1.76bn to the tariff bill if they are all approved.
Three rebates (duty exemptions) might be removed, costing the 24 importers who use these rebates R87 million in duties per year if they go. Import permits are being considered for 61% of all steel imports. In other words, it's not just about the tariff anymore. You may be faced with a simple refusal to be allowed to import. It doesn't end there. With no detail being provided, scrap metal (again), iron ore, and coking coal are being reviewed to see how their cost can be brought down to local consumers.
Itac might, in other words, be looking to extend PPS to iron ore and coal. We exported R104bn of bituminous coal and R109bn of iron ore in 2024.
Imagine the impact of now forcing these mines, already under strain from our rail and ports, to also offer their minerals at a discount locally before being allowed to obtain an export permit. Itac has understandably complained about the difficulties in doing this on scrap metal.
Imagine now doing this on a scale 20 times (at least) bigger than scrap metal. Oh and possible safeguards and compulsory st...
That is what economists call a trade-off and every policy decision has one, whether taken deliberately or not. Policies, by their nature, shift resources from one part of the economy (manufacturers, scrap recyclers, waste pickers, Amsa) to another part of the economy (mini-mills). This was the intention, but the assumption seems to be that shifting those resources would come at no cost. Wrong.
At the end of November 2023, Amsa announced that they were looking at closing their longs business in Newcastle, identifying the scrap metal policies as one of the reasons for the closure. Lots of meetings happened between Amsa and government for about a year.
There was panic but the steel policies remained as they were. We saw some action on the anti-dumping and safeguard front, but mostly meh.
January 2025 swings around and Amsa again announced the closures of their long steel business but this time doesn't flinch. To keep that business open beyond January 31, the government stumped up R380 million. Bear in mind, we still have the same policies, but Amsa have been paid to stay open for longer while the haggling goes on behind the scenes. Amsa would like a few billion more. And then Boom! On March 19, 2025, the International Trade Administration Commission (Itac) published the biggest tariff-and-other-stuff review in their 22-year history, and it's all focused on steel.
This review considers 609 tariff codes, over four chapters, covering everything from chapter 72 (primary steel and stainless steel - why stainless steel?), 73 (articles of steel, like pipes and wire), 82 (tools and cutlery), and 83 (miscellaneous steel articles, like padlocks).
This is R67 billion worth of imports. 355 of those tariff codes are being considered for a duty increase, adding R1.76bn to the tariff bill if they are all approved.
Three rebates (duty exemptions) might be removed, costing the 24 importers who use these rebates R87 million in duties per year if they go. Import permits are being considered for 61% of all steel imports. In other words, it's not just about the tariff anymore. You may be faced with a simple refusal to be allowed to import. It doesn't end there. With no detail being provided, scrap metal (again), iron ore, and coking coal are being reviewed to see how their cost can be brought down to local consumers.
Itac might, in other words, be looking to extend PPS to iron ore and coal. We exported R104bn of bituminous coal and R109bn of iron ore in 2024.
Imagine the impact of now forcing these mines, already under strain from our rail and ports, to also offer their minerals at a discount locally before being allowed to obtain an export permit. Itac has understandably complained about the difficulties in doing this on scrap metal.
Imagine now doing this on a scale 20 times (at least) bigger than scrap metal. Oh and possible safeguards and compulsory st...
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The Mercury (Digital) - 1 Issue, March 24, 2025